Liabil contrib earned rev expen net on asset assets

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Liabil- Contrib. Earned ,~ Rev- Expen- Net 'on Ass~et A_s_se_t_s it_ie_s __ +_c_a-,p:...i_ta_I_+-",-c_a...:p_it_a_1 ~ ,r. _~e_nu~e_s~~_s_e_s_~_ln_co_m_e--, .~ I +35,400 \ Revenue - - -- - _. ---- - - --- - ----- - -- - -- - - - ----- - - - - - - ---- -_. _. - ----- - ------ _. - - ------ - -- -- - -~. -- - -- -- - - - - --_. _. - - --- - - -- - -- --- - --- - - - - - - - - --- -- - - -- - - - - - -- R;~n~d j Earnings i UR 75 Rev 75 UR 75 I Rev 75 Cash 36,000 UR 600 Revenue 35,400 Cash +36,000 cash Cash for +600 +35,400 Retained Earnings = +35,400 36,000 I UR = Unearned Revenue I 600 Rev -75 +75 = Unearned Revenue = +75 Revenue . _010 balance sheet reports the following liabilities (in millions): -:::mI current liabilities __, , , , , _, , • ' ' , , , , , , , , , , , , , , , .. , , , " ,."."""", "",., revenue- non-current , .. , . , .. , . , , , , , ..• ..... , . , , .. , ..• , , . , .. n-current liabilities .. , , , , , , , , , , , . liabilities . , . , , , , .. , , , , , , . $12,015 5,723 2,984 20,722 1,139 5,531 $27,392 company reports deferred revenue as both current and noncurrent liabilities. These relate revenue that will be earned in the coming year ($2,984 million) and in subsequent years 29), These are substantial liabilities to Apple because many of its products are sold with 3USINESS INSIGHT I New Revenue Recognition Standard ne 2010, the FASB and IASB published a joint exposure draft (ED) on revenue recognition, Rev- from Contracts with Customers. These new revenue recognition rules are similar to the rules for :5-element contracts (described above). Companies must identify separate "performance obliga- n within a contract and account for each individually. A performance obligation is an enforceable ise to transfer goods or services to the customer. The challenge for companies will be to identify various performance obligations within a single contract. The core concept is whether or not a or service is "distinct." It is distinct if the good or service 1) can be sold separately, 2) has a . ct function, and 3) has a distinct profit margin. A distinct good or service is accounted for as a ate performance obligation. If a good or service is not distinct, it is combined with other goods services that form a distinct good or service. Companies recognize revenue as performance obliga- are satisfied, that is, when the customer obtains control of the goods or services. For construction projects the new rules will likely yield results similar to the percentage-of- ::ompletion accounting method described above. This is due to the fact that the various con- . ction tasks are highly interrelated and are not routinely sold independently. The critical fac- is whether 1) construction tasks are distinct and 2) control over the delivered goods and services is transferred to the customer continuously during the project (as opposed to at project completion). For example, if a company bills the customer throughout the project based either measurable outputs such as milestones or on measurable inputs such as time and materials, n transfer of control is continuous and revenue will essentially be recognized on a percentage- f-completlcn basis. Nonetheless, many construction firms sent comment letters to the FASB / SB, arguing that the new rules needlessly complicate revenue recognition and impose addi- . nal costs. The new rules could be required as soon as 2012, but the ultimate requirements and adoption dates will depend on additional due process by both boards.
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