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Running head: IMPLICATIONS ON INVESTORS AND CREDITORS

Implications on Investors and Creditors
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IMPLICATIONS ON INVESTORS AND CREDITORS

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Implications on Investors and Creditors
Implications for Investors
Revenue is a vital measure that the investors use to examine the performance of the
company they want to invest in. With this, therefore, the investor needs to access the presence of
an essential change in the revenue of a given company. To access the change, the investors may
use some questions such as does a company have financing as an arrangement element with the
customers? Does the company have agreements where there is the need for consideration as to
whether the revenue will be recognized at a given time? (Myers et al. 2018). Therefore,
implementation of the new standard of revenue recognition will provide the investors a chance to
know the nature of the agreements the company have with its customers as well as examine the
quality earnings of the company which the investors in making investments.
Also, the implementation of the new standard of revenue recognition offers the investors
a chance to determine the timing of the revenue recognition in their target company. There is
also a chance to determine the obligation of the performance of the target company as well the
transaction price that they charge for any contract. Those are some of the positive implication of
the implementation of the new standard (Myers et al. 2018).
The implementation of the new revenue recognition has different effects on investors.
First, an investor is an individual who commits a certain amount of capital in a company having
the hope of receiving financial returns. The investments are usually in various ways for example
as bonds, retirement plans, stocks, mutual funds among others. Usually, before investing, the
investors undertake an analysis to examine which investment chance is favorable to minimize the
failure risks and maximize of getting returns. With the implementation of the new revenue
recognition standard, there are some implications for the investors (Peters, 2018).
Implications on the Amount of Revenue
Revenue is all that matters for the investors, and it is the point of starting in defining all
income variants such as the net income, and it is also the strong indicator of value creation in the
economy. The implementation of the new revenue standard has an essential change for the
investors in particular as revenue in the most critical part of the financial status of any business.
The reaction of the stock markets of potential revenue have misreporting from companies such as
Toshiba, Boeing and Enron have driven home the need of investors to attach to the performance
measure of revenue, input valuation which will serve as an indicator of management quality
(Pitman & Martin, 2017). The essential improvement the implementation includes having a
comparable reporting as IFRS requires it. With the implementation of the new standard, the
investors have engaged themselves in the management of the company where they have made
investments to probe on the implications they are experiencing. They have also engaged in the
management with the aim of ascertaining the rhyming effect on the profiles of the gross margins
of the company (Rutledge et al. 2016).
The implications of the new standard have not impacted change on all companies but of
importance is how the investors are in a position to recognize their revenue. Those companies
that are characterized by a simple business model...