A Brief Note On The Income Measurement And Revenue Recognition

Revenue recognition accounting standard ensures the correct revenue is recorded for each period of the income statement, it was previously based on the realization principle - requires revenue to be recognized when the earning process is virtually complete and is certain to collectability. FASB & IASB developed a new revenue recognition standard, Revenue from Contracts with Customers,” on May 28, 2014, ASU No 2014-09. (RRPA Revenue Recognition and Profitability Analysis-1-LO1-5).

Revenue is reported in one lump sum at a specific point in time and breakage on the cards is reported as revenue in one lump sum at a specific time. Journal of Accountancy. “Revenue recognition’s effect on gift card accounting: Are you prepared?” (Blake, Rouse. May 28, 2013)

There were a total of 72 gift card sales between 11/14/2015-today, but only 52 of those transactions were charge a credit card fee (record attached). The total dollar amount withheld for all 52 transactions was

In 2018 it will be mandatory that AASB111 and AASB108 are replaced by AASB15. This new standards main principle necessitates entities to recognise revenue to portray the transfer of goods or services to customers in amounts that mirror the payment, of which the company expects to be entitled. AASB15 also provides regulation for transactions that were not previously addressed thoroughly, such as service revenue and contract modifications. Essentially it presents a 5 step system of Identifying the contracts with the customer, identifying the separate performance obligations in the contract, determining the transaction price, allocating the transaction price to certain performance obligations and recognizing revenue when or as the entity fulfils performance obligations – This is demonstrated towards the end of the report with a

Bug-Off Exterminators provides pest control services and sells extermination products manufactured by other companies. The following six-column table contains the company's unadjusted trial balance as of December 31, 2011.

Based on these guidelines, revenue should not be recognized until it is realized or realizable and

We do not agree with BV's practice of recognizing the revenue upon shipping the supplies because without acceptance of supplies by stores, it does not satisfy the requirement of completing all activities that lead to completion of the critical event.

In its financial report, Walmart provides an unaudited Condensed Consolidated Statements of Income. This financial statement provides financial information measuring the results of operations dating back three and six months prior to the statement date for the current and previous year. The statements of income begins with revenues; which includes the net sales, membership and other income, total revenue, cost of sales, and operating, selling, general, and administrative expenses. Following the revenues account is the operating income account and the interest account. The interest account includes debt, capital leases, and interest income, giving net interest. Income from operations before income taxes and provisions for income taxes are the next accounts listed, respectively. The income from continuing operations and loss from discontinued operations, net of tax, follow. These accounts are followed by consolidated net income and consolidated net income attributable to noncontrolling interest, which give the amounts in the next

Collectability of revenues must be explicitly assessed in a contract before applying the revenue recognition model. An entity must take into account the credit risks and probability of revenue collection as the amount of consideration for the transfer of goods or services based on the customer’s capacity and intention to make due payments. This is one essential difference from the previous standards (Wilson and Sobolewski).

“An income statement measures the performance over some period of time, usually a quarter or a year”, states the authors of Essentials of Corporate Finance. (Ross, Westerfield, Bradford 2014, p. 27). There are three aspects of an income statement that a financial manager needs to keep in mind when analyzing the numbers; GAAP, cash versus noncash item, and time and costs. GAAP will show revenue when it accrues. According to the authors of Essentials of Corporate Finance, “The general rule is to recognize revenue when the earnings process is virtually complete and the value of an exchanges of goods or services is known or can be reliably determined” (Ross, Westerfield, Bradford 2014 p. 28). As some production costs of items produced are made on credit, the revenue on that item will not be recognized until the sale of that item occurs; any other costs incurred in assembling that product will also not be recognized until the time of its sale (Ross, Westerfield, Bradford 2014 p.28- 29). With this situation occurring, the income statement might not be able to represent all the

There where accounts that had the same debit and credit amounts just a few days apart. At the end of the last quarter in 2009, there were 22 sales recorded. At the end of the previous quarters there was not a high amount of sales which leads one to think that the sales were booked at the end of the year to make the company meet their goal. There was also a high number of invoices with no bill of landing. With a high number of no bill of landings, false billing is presumed. With a bill of landing of a lesser weigh than that which was invoiced, leads to the full order not being shipped, and over charging of the customer or that special arrangements have been made with the customer to receive a discount for early billing. There was also 5 times where invoices where invoiced before they were shipped. This leds to the fact that sales where most likely

Based on the information outlined above, the revenue recognition accounting would follow that for Multiple-Element Arrangements as outlined in ASC 605-25. The accounting units of system and PCS will be accounting for separately, because the criteria of ASC 605-25-5-a are met: “The delivered item or items have value to the customer on a standalone basis. The item or items have value on a standalone basis if any vendor sells them separately or the customer could resell the delivered item(s) on a standalone basis. In the context of a customer's ability to resell the delivered item(s), this criterion does not require the existence of an observable market for the deliverable(s).” As outlined in the case, both the customer support system and the post-contract customer support have standalone relative selling prices of $12,000 and $2,000, and could be purchased separately. Therefore, it is appropriate to use Vendor-Specific Objective Evidence to determine the amount of revenue to recognize for the system ASC 605-25-30 and the breakout for PCS, but PCS will also be subject to nonrefundable up-front fee stipulations for revenue recognition. According to ASC 605-10-S99 SEC Materials and the SEC’s codification of Staff

Revenue recognition is currently one of the most complex areas of accounting, however it hasn’t always been this way. From relatively simple beginnings, the guidance for recognizing revenue has grown larger and more complex along with the business environment. One reason revenue recognition has needed frequent improvement is its vulnerability to fraud. It has been recorded that several frauds during the 1987-2007 time period were a result of an overstatements of revenue, typically at the end of an accounting period in an effort to boost earnings. This fact shows the importance of rigorous revenue recognition guidelines, while further demonstrating a need for the revenue recognition project. There was also a need to clarify the differences in

Article analysis for Revenue Recognition Timing and Attributes of Reported Revenue: The Case of Software Industry’s Adoption of SOP 91-1 by Yuan Zhang

IAS 18 considers the accounting procedure of potential components of revenue organization primarily from transactions involving the sale of goods, rendering of services, as well as through other organizations or individuals property of the reporting organization, giving interest, dividends or royalties. If the probability of the economic