L13 Notes_Part_2 - LIBERAL

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© W.R. Knechel Delayed Revenue Recognition: Installment Method Generally, revenue is recognized when: The earnings process is substantially complete. Cash is collectible. The transaction is measurable in monetary terms. Uncertain collectibles result in delaying revenue recognition until cash is collected . Installment method : revenue is recognized as cash is collected, often over several accounting periods.
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© W.R. Knechel Revenue Recognition Before the Earnings Process is Complete: Long-Term Construction Contracts Completed Contract Method Percentage-of- Completion Method Revenue and expenses are recognized in the year the contract is completed. Construction-in progress years show no revenue or expenses. Revenue and expenses recognized each year as work is accomplished. Revenues each year are based on the ratio of costs incurred to total costs.
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© W.R. Knechel Revenue Recognition – Special Cases
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Unformatted text preview: LIBERAL ---------------------------------------------------------------------CONSERVATIVE gold L-T Contract Shipment Receipt Warranty Xmas Trees (bought in batch FOB? FOB dest. Contract no revenue until cost recovered prepaid expense Cash>cost 1 2 3 4 airlines not when sale occurs or cash collected but when flight occurs 1. Long term Construction Contract (as opposed to winery) -Specific customer identified and price agreed upon (contract) -Significant performance and remainder estimatible -Collection reasonably assured 2. Commodity -Established market price -Units are homogeneous -Low risk regarding remaining costs 3. Title transfer at time of shipment 4. Title transfers at time of delivery 5. Wait until cash is collected -Customer is in distress -Contingencies exist -Full right of return and return likely...
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This note was uploaded on 10/05/2011 for the course ACG 5637 taught by Professor Monikacaushoulli during the Fall '08 term at University of Florida.

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L13 Notes_Part_2 - LIBERAL

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