tailieunhanh - Lecture Intermediate accounting - Chapter 5: Income measurement and profitability analysis

The focus of this chapter is revenue recognition. We first discuss the general circumstance in which revenue is recognized when a good or service is delivered. Then we discuss circumstances in which revenue should be deferred until after delivery or should be recognized prior to delivery. | Income Measurement and Profitability Analysis Chapter 5 Chapter 5: Income Measurement and Profitability Analysis The focus of this chapter is revenue recognition. We first discuss the general circumstance in which revenue is recognized when a good or service is delivered. Then we discuss circumstances in which revenue should be deferred until after delivery or should be recognized prior to delivery. The chapter also includes an appendix describing requirements for interim financial reporting and a Where We’re Headed Supplement explaining in detail a proposed Accounting Standards Update (hereafter, “proposed ASU”) that the FASB and IASB plan to issue in 2012 that substantially changes how we account for revenue recognition. Realization Principle Record revenue when: AND there is reasonable certainty as to the collectibility of the asset to be received (usually cash). the earnings process is complete or virtually complete. Revenues are inflows or other enhancements of assets of an entity or settlements of its liabilities (or a combination of both) from delivering or producing goods, rendering services, or other activities that constitute the entity’s ongoing major or central operations. What is revenue? According to the FASB, “Revenues are inflows or other enhancements of assets of an entity or settlements of its liabilities (or a combination of both) from delivering or producing goods, rendering services, or other activities that constitute the entity’s ongoing major or central operations.” In other words, revenue tracks the inflow of net assets that occurs when a business provides goods or services to its customers. Revenue recognition criteria help ensure that an income statement reflects the actual accomplishments of a company for the period. In other words, revenue should be recognized in the period or periods that the revenue-generating activities of the company are performed. The realization principle requires that two criteria be satisfied before revenue can | Income Measurement and Profitability Analysis Chapter 5 Chapter 5: Income Measurement and Profitability Analysis The focus of this chapter is revenue recognition. We first discuss the general circumstance in which revenue is recognized when a good or service is delivered. Then we discuss circumstances in which revenue should be deferred until after delivery or should be recognized prior to delivery. The chapter also includes an appendix describing requirements for interim financial reporting and a Where We’re Headed Supplement explaining in detail a proposed Accounting Standards Update (hereafter, “proposed ASU”) that the FASB and IASB plan to issue in 2012 that substantially changes how we account for revenue recognition. Realization Principle Record revenue when: AND there is reasonable certainty as to the collectibility of the asset to be received (usually cash). the earnings process is complete or virtually complete. Revenues are inflows or other enhancements of assets of an .