week 5 Dicussion - Analyzing Revenue Recognition Methods.docx

Week 5 Dicussion - Analyzing Revenue Recognition Methods.docx

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Week 5 Discussion Analyzing Revenue Recognition Methods Managers must determine which revenue recognition method is best for a company while complying with revenue recognition rules. Suppose the selected ADR firm is considering whether to report revenues under U.S. GAAP or IFRS, and their choice will determine which stock exchange the ADR trades. What does management need to know, estimate, and assume to determine which revenue recognition method is best for the firm? Revenue is recognized when earned and payment is assured; expenses are recognized when incurred and the revenue associated with the expense is recognized. According to the principle of revenue recognition, revenues are recognized in the period earned (buyer and seller have entered into an agreement to transfer assets) and if they are realized or realizable ( cash payment has been received or collection of payment is reasonably assured). The matching principle, part of accrual accounting, requires that expenses be recognized when obligations are (1) incurred (usually when goods are transferred or services rendered), and (2)
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  • Winter '15
  • Revenue Recognition, Generally Accepted Accounting Principles, Deferral, revenue recognition rules, revenue recognition method

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