Requirement – 1
Performance obligation
Performance obligation is the promise made by the seller to supply the goods and service to the customer on or before the contract.
The revenue recognition principle
The revenue recognition principle refers to the revenue that should be recognized in the time period, when the performance obligation (sales or services) of the company is completed.
To discuss: The manner in which S Company’s 1997 “bill-and-hold” strategy might have contributed to artificially high earnings in 1997.
Requirement – 2
To discuss: The manner in which the strategy have led to the unusually high accounts receivable.
Requirement – 3
To discuss: The manner in which the S Company’s 1997 bill-and-hold strategy might have constituted to a 1998 earnings decline.
Requirement – 4
To discuss: The manner in which the earnings management affects earning quality.
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