Revenue Recognition Base On "Percentage Of Completion" Brings To Profit Smoothing?

Accounting Standards for Business Enterprises No.14–income and Accounting Standards for Business Enterprises No.15–Construction Contract Revenue list revenue recognition criteria for construction companies in China,which is percentage of completion.In May 2014,IASB promulgated IFRS15,which is International Financial Reporting Standard—Revenue from Contracts with Customers,it provides new criteria guidance for revenue recognition.Firstly,it stipulates 5-steps model should be satisfied for revenue recognition;Secondly,it stipulates“Input method”and“output method”to define completion percentage,even though these two methods are similar with completion of percentage,the conditions are tighter more.On 5^th,July 2017,Ministry of Finance of the People's Republic of China released the revised Accounting Standards for Business Enterprises No.14–income,the contents are similar with IFRS15,it will come into effect on 1^st,January 2018.This standard proves that China will use new revenue recognition standard in 2018.Revenue recognition in Construction industry for country is very important because completion period is long,operation revenue is high and has a substantial growth.To sum up,this paper is going to analyze revenue recognition's influence caused by IFRS15 based on expectation.Based on background above,this paper choose 6 biggest construction companies named with“zhong”to be research object.Firstly,this paper tries to list policy background,correlation theory and Domestic and foreign literature;Secondly,this paper will use financial data to calculate financial indicators of the six cases between2011-2013 and 2014-2016 by using inventory turnover to find results.Finally,this paper gives conclusions and suggestions.This paper finds that after new accounting standard issued,criteria of revenue recognition for completion of percentage were limited,the phenomenon of profit smoothing was also reduced after 2014.It also proves that the IFRS15 has a positive effect for this industry.The innovation of this paper has two parts:1.It uses DID method to analysis financial data to get results,there is no other paper used similar method on percentage of completion.2.Expectation affection on new accounting standard is also an innovation point.Therefore the conclusion given by the paper is reliable and forward-looking.