Final answer:
A major criticism of GAAP concerning revenue recognition is the complexity and the discretionary power it used to give companies, potentially allowing for earnings manipulation. However, recent updates like ASC 606 have addressed these issues by providing more clarity and consistency in applying revenue recognition standards.
Step-by-step explanation:
A major criticism of the Generally Accepted Accounting Principles (GAAP) in regard to revenue recognition is that they were historically seen as too complex and rule-based, which potentially leads to earnings management or manipulation. This criticism is centered around the idea that GAAP allowed for too much discretion, particularly concerning the timing of revenue recognition, which companies could take advantage of to inflate their financial performance artificially.
However, it is important to note that in recent years, there have been significant changes to revenue recognition standards with the introduction of Accounting Standards Update (ASU) 2014-09 and the creation of the Financial Accounting Standards Board (FASB) and International Accounting Standards Board (IASB) joint standard ASC 606, which seeks to address these concerns by providing a more principles-based approach and enhancing comparability across industries.