CACC 414 CH06

CACC 414 CH06 - CACC414 CH06 REVENUE RECOGNITION CRITERIA...

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CACC414 CH06 REVENUE RECOGNITION CRITERIA Realization is the process of converting noncash resources and rights into money. In accounting it refers to sales of assets for cash or claims to cash. Revenue recognition is the process of including an item in the financial statements of an entity REVENUES ARE RECOGNIZED WHEN THE FOLLOWING CRITERIA ARE MET: 1. Performance is achieved Risks and rewards are transferred and/or the earnings process is substantially complete Measurability is reasonably assured That is: (1) Persuasive evidence of an arrangement exists The following factors are considered when determining if persuasion exist: - Customary business practice – refers to how and when the entity considers that the terms of the arrangement are finalized - Side arrangements – all related agreements must be reviewed together before revenue is recognized - Economic substance – refers to type of transaction – sales? Consignment? Finance? (2) Delivery has occurred or the service has been rendered And (3) The seller’s price to the buyer is fixed and determinable AND 2. Collectibility is reasonably assured EARNINGS PROCESS - The action the company takes to add value
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This note was uploaded on 03/27/2012 for the course ACC 414 taught by Professor Unknown during the Winter '09 term at Ryerson.

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CACC 414 CH06 - CACC414 CH06 REVENUE RECOGNITION CRITERIA...

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