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ch18 - 18 Revenue Recognition 14thEdition...

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18-1 Intermediate Accounting 14th Edition 18 Revenue Recognition Kieso, Weygandt, and Warfield
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18-2 1. Apply the revenue recognition principle. 2. Describe accounting issues for revenue recognition at point of sale. 3. Apply the percentage-of-completion method for long-term contracts. 4. Apply the completed-contract method for long-term contracts. 5. Identify the proper accounting for losses on long-term contracts. 6. Describe the installment-sales method of accounting. 7. Explain the cost-recovery method of accounting. Learning Objectives Learning Objectives Learning Objectives Learning Objectives
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18-3 The Current Environment The Current Environment The Current Environment The Current Environment Restatements for improper revenue recognition are relatively common and can lead to significant share price adjustments. Revenue recognition is a top fraud risk and regardless of the accounting rules followed (IFRS or U.S. GAAP), the risk or errors and inaccuracies in revenue reporting is significant.
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18-4 The revenue recognition principle provides that companies should recognize revenue Guidelines for Revenue Recognition The Current Environment The Current Environment The Current Environment The Current Environment LO 1 Apply the revenue recognition principle. (1) when it is realized or realizable and (2) when it is earned .
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18-5 Earlier recognition is appropriate if there is a high degree ( how high? ( 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 The Current Environment The Current Environment LO 1 Apply the revenue recognition principle.
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18-6 The Current Environment The Current Environment The Current Environment The Current Environment LO 1 Apply the revenue recognition principle. Illustration 18-2 Revenue Recognition Alternatives
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18-7 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. LO 2 Describe accounting issues for revenue recognition at point of sale. Implementation problems, Sales with Discounts Sales When Right of Return Sales with Buybacks Bill and Hold Sales Principal-Agent Relationships Trade Loading and Channel Stuffing Multiple-Deliverable Arrangements Revenue Recognition at Point of Sale (Delivery) Revenue Recognition at Point of Sale (Delivery) Revenue Recognition at Point of Sale (Delivery) Revenue Recognition at Point of Sale (Delivery)
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18-8 LO 2 Describe accounting issues for revenue recognition at point of sale.
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