A Note On Revenue Recognition And Asset Measurement

A slightly revised version of Carl L. Nelson's paper, A Note on Revenue Recognition and Asset Measurement, is presented. A few terms were changed to conform to current prevailing usage and 2 earlier versions were combined. When revenue is recognized at the time of production, accounts receivable and inventory are measured in terms of the same attribute, selling price. When revenue is recognized at the time of sale, the usual situation for most companies, accounts receivable and inventory are measured in terms of different attributes. When revenue is recognized at the time of cash collection, accounts receivable and inventory are measured in terms of the same attribute, historical cost. Understanding that consistent attribute measurements result when revenue is recognized at the time of production makes more apparent that mixed attribute measurements result when revenue is recognized at the time of sale.