Revenue_Recognition

Revenue_Recognition - Revenue is recognized when two...

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Revenue is recognized when two conditions are satisfied: ± “Critical event”—firm has earned the revenue. ± “Measurability”—amount and collectability are reasonably assured. Condition 1: The critical event in the process of earning the revenue has taken place. Condition 2: The amount of revenue that will be collected is reasonably assured and is measurable with a reasonable degree of reliability. Time of sale is the most common point when revenue is recognized Revenue is recognized when the entity has done something to “earn” the asset being received, and the revenue can be measured with a reasonable degree of assurance. These conditions may be satisfied before, on, or after the point of sale. Accrual-basis income measurement is the cornerstone of income measurement. Revenues are recorded in the period when they are “earned” and become “measurable.” a. Revenues are “earned” when the seller has performed a service or conveyed an asset to a buyer. b. Revenues are “measurable” when the value to be received for that service or asset is reasonably assured and can be measured with a high degree of reliability. Deferred revenue exists when a liability to provide a good or service is
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This note was uploaded on 05/01/2008 for the course MGMT 120A taught by Professor Litt during the Spring '08 term at UCLA.

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Revenue_Recognition - Revenue is recognized when two...

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