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 revenue recognition principle: Recognize revenue CAUTION: Largest source of restatements. A Complicated Topic! More than 100 standards on revenue and gain recognition Industry-specific. Sometimes conflicting The Current Environment The Current Environment LO 1 Apply the revenue recognition principle. (1) when it is realized or realizable and (2) earned – earnings process is complete .
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Chapter 18-3 Sale of product from inventory Type of 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 the revenue recognition principle. Illustration 18-1 Revenue Recognition Classified by Type of Transaction
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Chapter 18-4 Earlier recognition is appropriate if there is a high degree of certainty about the amount of revenue earned. Delayed recognition is appropriate if the degree of uncertainty concerning the amount of revenue or costs is sufficiently high or sale does not represent substantial completion of the earnings process. Departures from the Sale Basis The Current Environment The Current Environment LO 1 Apply the revenue recognition principle.
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Chapter 18-5 Revenue Recognition Alternatives The Current Environment The Current Environment LO 1 Apply the revenue recognition principle. Illustration 18-2
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Chapter 18-6 FASB’s Concepts Statement No. 5 , companies usually meet the two conditions for recognizing revenue by the time they deliver products or render services to customers. Departures from the Sale Basis Revenue Recognition at Point of Sale (Delivery) Revenue Recognition at Point of Sale (Delivery) LO 2 Describe accounting issues for revenue recognition at point of sale. Implementation problems Sales with Buyback Agreements Sales When Right of Return Exists Trade Loading and Channel Stuffing
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Chapter 18-7 When a repurchase agreement exists at a set price and this price covers all cost of the inventory plus related holding costs, the inventory and related liability remain on the seller’s books. In other words, no sale. Sales with Buyback Agreements Revenue Recognition at Point of Sale (Delivery) Revenue Recognition at Point of Sale (Delivery) LO 2 Describe accounting issues for revenue recognition at point of sale.
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Chapter 18-8 Recognize revenue only if six conditions have been met. Sales When Right of Return Exists Revenue Recognition at Point of Sale (Delivery) Revenue Recognition at Point of Sale (Delivery) LO 2 Describe accounting issues for revenue recognition at point of sale.
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This note was uploaded on 02/14/2011 for the course AIM 6330 taught by Professor Volkanmuslu during the Spring '10 term at University of Texas at Dallas, Richardson.

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

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