F2- Timing Issues Flashcards
Revenue recognition US GAAP
recognized and realizable when earned
a. persuasive evidence of arrangement exists
b. delivery has occurred or services have been rendered
c. price fixed+determinable
d. collection reasonably assured
sale takes place when delivery of goods or setting aside goods takes place or transfer of legal title
Revenue recognition IFRS
recognized when:
a. revenue and costs incurred for transaction can be measured reliably
b. probable that economic benefits from transaction will flow to entity
c. entity has transferred to buyer significant risks and rewards of ownership
d. entity doesn’t retain managerial involvement to degree associated w/ ownership/control over goods
rendering of services criteria
use percentage of completion
- revenue and costs incurred measured reliably
- probable economic benefits will flow to entity
- stage of completion of transaction at end of reporting period can be measured reliably
revenues from interest, royalties, dividends recognized when
- revenues can be measured reliably
2. probable economic benefits from transaction will flow to entity
construction contracts
estimated reliably when:
- contract revenue and contract costs can be measured reliably
- probable economic benefits flow to entity
- both contract costs to complete contract and stage of contract completion at end of reporting period can be measured reliably
multiple element arrangement (US GAAP)
FV of contract must be allocated to separate elements (revenue recognized separately for reach element)
Deferred credit/liability
cash received before earned= deferred credit. deferred credit recognized as revenue when earned
examples: unearned interest income, unearned rental income, unearned royalty income
Expenses definition
reductions of assets/increase in liabilities during period of time: come from rendering of services, delivering of goods, any activity that may constitute major ongoing/central operations of entity
recognize according to matching principle
Revenue recognition criteria when right of return exists
- sales price substantially fixed at date of sale
- buyer assumes all risk of loss bc goods considered in buyer’s position
- buyer has paid some form of consideration
- product sold substantially complete
- amount of future returns reasonably estimated
Franchisor Acct (franchise fee revenue)
a. unearned revenue: PV of contract amts relating to future services should be recorded as unearned revenue
b. earned revenue: report when conditions of sale have been substantially performed
“substantial performance”
- franchisor has no obligation to refund any payment received
- initial services required of franchisor have been performed
- all other conditions of sale have been met
purchased intangible asset
record at cost: legal/registration fees incurred to obtain an intangible asset shoudl be capitalized
internally developed intangible assets
expense against income when incurred
examples: trademarks, goodwill from advertising, cost of developing, maintaining, restoring goodwill
exceptions to classification of intangible assets
costs associated with intangibles specifically identifiable can be capitalized
- legal fees/costs related to successful defense of asset (unsuccessful= expensed, test asset for impairment)
- registration/consulting fees
- design costs
- other direct costs to secure the asset
capitalization of costs
record cost of intangible assets acquired in “arms length transactions”
cost measured by
- amt cash disbursed or fv of assets distributed
- PV of amts paid for liabilities incurred
- fv of consideration received for stock issued
cost determined by fv of consideration given or by fv of property acquired
cost of unidentifiable intangible assets measured as difference between cost of group of assets or enterprise acquired and sum of costs assigned to identifiable assets acquired, less liab assumed (residual $)
