ch18 - CHAPTER 18 18 REVENUE RECOGNITION(Installment sales...

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Chapter 18-1 C H A P T E R C H A P T E R 18 18 REVENUE RECOGNITION REVENUE RECOGNITION (Installment sales method excluded (Installment sales method excluded pages 949-956) pages 949-956) Intermediate Accounting I Intermediate Accounting I Prof. Volkan Muslu Prof. Volkan Muslu
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Chapter 18-2 The revenuerecognition principle: Recognizerevenue CAUTION: Largest source of restatements. A Complicated Topic! More than 100 standards on revenueand gain recognition Industry-specific. Sometimes conflicting The Current Environment The Current Environment LO 1 Apply therevenuerecognition principle. LO 1 Apply therevenuerecognition principle. (1) when it is realized or realizable and (2) when it is earned – earnings process is complete .
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Chapter 18-3 Sale of product from inventory Typeof Transaction Rendering a service Permitting use of an asset Sale of asset other than inventory Date of sale (date of delivery) Services performed and billable As time passes or assets are used Date of sale or trade- in Gain or loss on disposition Revenue from interest, rents, and royalties Revenue from fees or services Revenue from sales Description of Revenue Timing of Revenue Recognition The Current Environment The Current Environment LO 1 Apply therevenuerecognition principle. LO 1 Apply therevenuerecognition principle. Illustration 18-1 Revenue Recognition Classified by Typeof Transaction
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Chapter 18-4 Earlier recognition is appropriateif thereis a high degreeof certainty about the amount of revenueearned. Delayed recognition is appropriateif the degreeof uncertainty concerning theamount of revenueor costs is sufficiently high or saledoes not represent substantial completion of theearnings process. Departures fromtheSaleBasis The Current Environment The Current Environment LO 1 Apply therevenuerecognition principle. LO 1 Apply therevenuerecognition principle.
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Chapter 18-5 Revenue Recognition Alternatives The Current Environment The Current Environment LO 1 Apply therevenuerecognition principle. LO 1 Apply therevenuerecognition principle. Illustration 18-2
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Chapter 18-6 FASB’s Concepts Statement No. 5 , companies usually meet thetwo conditions for recognizing revenueby thetimethey deliver products or render services to customers. Departures fromtheSaleBasis Revenue Recognition at Point of Sale (Delivery) Revenue Recognition at Point of Sale (Delivery) LO 2 Describeaccounting issues for revenuerecognition at point of sale. LO 2 Describeaccounting issues for revenuerecognition at point of sale. Implementation problems Sales with Buyback Agreements Sales When Right of Return Exists TradeLoading and Channel Stuffing
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Chapter 18-7 When a repurchaseagreement exists at a set price and this pricecovers all cost of theinventory plus related holding costs, theinventory and related liability remain on theseller’s books. In other words, no sale.
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