05-1 The Revenue Recognition Topic provides guidance for transaction-specific revenue recognition and certain matters related to revenue-generating activities that are not addressed specifically in other Topics. Other Topics may contain transaction-specific revenue recognition guidance related to transactions in those Topics. This Topic includes the following Subtopics:…
References: www.irs.gov/publications/p334/ch02.html, Kimmel, P. D., Weygandt, J. J., & Kieso, D. E. (2011). Financial accounting: Tools for business decision making (5th ed.). Hoboken, NJ: John Wiley & Sons,…
Page 43 describes revenue from sales to customers shipped directly from stores and online and catalog sales includes shipping revenue, when applicable, and is recognized upon estimated receipt by the customer. Credit card revenues include finance charges, late fees and other fees generated by credit cards are recognized as revenue when earned. They recognize finance charges on delinquent accounts until they become 120 days past due, after which we place accounts on non-accrual status. Finally on page 45, sale of gift cards are recognized as revenue when the gift card is redeemed by the customer.…
Requirement 2: What are the separate units of accounting in the sales agreement between AOI and…
c. To provide reports to users about the economic activities and conditions of a business.…
will be biased towards accounting that yields lower net profits (if any) so that the players will not have a substantial claim for more pay…
Based on these guidelines, revenue should not be recognized until it is realized or realizable and earned.(FASB ASC 605-10-25-3; FASB ASC 605-10-25-5)Recognition and Measurement in Financial Statements of Business Enterprises, paragraph 83(b) states that "an entity's revenue-earning activities involve delivering or producing goods, rendering services, or other activities that constitute its ongoing major or central operations, and revenues are considered to have been earned when the entity has substantially accomplished what it must do to be entitled to the benefits represented by the revenues". Paragraph 84(a) continues "the two conditions (being realized or realizable and being earned) are usually met by the time product or merchandise is delivered or services are rendered to customers, and revenues from manufacturing and selling activities and gains and losses from sales of other assets are commonly recognized at time of sale (usually meaning delivery)"…
According to the Generally Accepted Accounting Principles (GAAP), revenue should be recognized when a transaction occurs and 1) the revenue is realized or realizable and 2) the revenue is earned. Revenue is generally considered realized when cash is received for a product or service and realizable when a promise to pay is made (i.e. accounts receivable or notes payable). There are also issues with a customer’s ability to pay along with the timeliness of that payment. Several critics even believe that the only real way to determine revenues is through the matching of cash receipts to their corresponding expenses.…
On May 2014, the International Accounting Standards Board (IASB) and the Financial Accounting Standards Board (FASB) had jointly issue the converged standard, IFRS 15, on the Recognition of Revenue from Contracts with Customers. The new standard create a common revenue recognition standard for both IFRS and US GAAP, it clarify the principle for recognizing revenue, enable consistently application in regardless of transactions, industries or capitals markets. Application of IFRS 15 will require preparers of financial statement to follow the 5 steps models with specific guidance. Therefore, improve the comparability in financial reporting. The reason for converging is due to the weakness and inconsistence and also the inadequate disclosure requirement of the existing standards. Most impacted industries are real estate, software development and telecommunication where customers purchase package of prepayment plans along with handset and post-delivery service. For instant, Telstra will have to reconsider their ‘New Phone Feeling’ program as when applying IFRS 15 the recognition of revenue for the handset will not be zero. Instead, they will have to follow step 4 of which require the entity to recognise the transaction prices for each performance obligations.…
The accounting practices at Carlton normally permit revenue recognition after the shipment of the computer systems. Peale, Gower and Quill, Carlton’s auditors, are worried about the accounting practices regarding revenue recognition of certain transactions during the last quarter of 20X1. They are also worried about the adverse effects of such accounting on the company’s quality of earnings and thereby on its planned public stock offering in February 20X2.…
In September, 2002, one of the most significant changes in the future direction of the United States’ accounting regulations occurred during a joint meeting of the US Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB). The meeting concluded with the Norwalk Agreement that articulated the commitment of both renowned boards to converge their standards into a single set of high quality global accounting standards (FASB and IASB, 2002). Since that meeting, the International Financial Reporting Standards (IFRS) and the US Generally Accepted Accounting Principles (US GAAP) have been gravitating towards one another.…
FASB Codification System is a database and research system developed by the Financial Accounting Standards Board that pulls together many of the authoritative resources about accounting standards into a single, searchable system. The purpose of this system is to better organize accounting principles and laws to simplify user access. The nine content areas located in the system include Presentation, Assets, Liabilities, Equity, Revenue, Expenses, Broad Transactions, and Industry. Presentations offers guidance on income statement preparation, notes to financial statements, and for calculating earnings per share. The Assets section contains information on accounting for receivables, investments, and inventory. Liabilities section contains assets retirement and environmental obligations, contingencies, and distinguishing liabilities from equity, and accounting professionals. The Equity section discusses status, recognition, and SEC materials needed to record equity-based payments to non-employees. The Revenue area guide accounting professionals on revenue recognition and updates to accounting standards that affect revenue recognition. Expenses describes procedures used to report compensation, including stock compensation, research and development, and for preparing income taxes. The Broad Transaction area contains information on business combinations, consolidation, fair value measurements and disclosures, financial instruments, and leases. Finally, the Industry area shows the user data related to specific industries, including oil and gas, broker and dealers, and depository and lending.…
With respect to revenue recognition, ASC 605-45 provides guidance on whether to report revenue on the basis of the gross amount billed to the customer (as a principal) or the net amount retained by the company (as an agent).…
Cited: Financial Accounting Standards, Codification (605-45-45-1): Topic: 605 Revenue Recognition, Subtopic: 45 Principal Agent Consideration, Section: 45 Other Presentation Matters, Subsection: 1 General…
To recognise the revenue, the performance has to be substantially complete and the collection is reasonably assured. The collection will be assured, because the contract itself is a legal obligation for the purchaser to pay the price negotiated.…