Financial Reporting v2 Flashcards
Revenues from Contracts with Customers excludes:
Updated for FASB ASC 606
Insurance Contracts
Lease Contracts
Financial Instruments
Contracts with Non-customers
Revenue Recognition Steps (COPAS) means…
Contract Obligations Price Allocate Satisfies
What are the 5 contract elements Revenue Recognition?
-Commercial Substance o Rights to Goods/Services Identified o Approval & Commitment by Each Party o Payment Terms Identified o Collection is Probable
What is revenue?
Inflows of assets from central/main activities of the business
What is Gains?
Increase in equity from an activity or event that is NOT central to the main activities of the business.
(Can be operating or non-operating)
What is a loss?
Decrease in equity from an activity or event that is not central to the main activities of the business.
What is the operating cycle?
Average time to turn materials/services to cash
Revenue: Cash to Accrual Basis (SPEAR-BAR)
Sales (i.e. Customer Payments)
+Ending Accounts Receivable
–Beginning Accounts Receivable
Sales Revenue on an Accrual Basis
COGS from Cash Basis (CRAP-I)
Cash Remitted (i.e. paid – made acronym easier)
+Increase in Accounts Payable
–Increase in Inventory
COGS on an Accrual Basis
Discontinued Operations and its processes..
Company ceases operating a business segment
§ Must represent a strategic shift
• Major effect on operations and financials
o Disposal Assets must be
§ Held for Sale
37
§ Sold
§ Disposed of another way
o Includes
§ Income (or Loss) from the period
§ + Gain (or Loss) from disposal
o Reported
§ Net of Tax after Continuing Operations in
the period it’s classified as held for sale and
all prior periods presented in the financial
statements
Unusual or Infrequent Items
Formerly Extraordinary Items o Two Options for Reporting § Income Statement • Above Income from Continuing Operations § Footnotes to Financial Statements o Change: No longer net-of-tax o Treatment in Financial Statements § Retrospective or Prospective Treatment 38 • Additional disclosures required for previous extraordinary classifications Ø Constant Dollar Accounting o Uses CPI to adjust assets to reflect a consistent level of purchasing power due to inflation
Expenses are recognized when…
Incurred
If expenses are not yet paid we…
Accrue them
General and Administrative (G&A) Expense or (SG&A) include..
Office staff salaries, rent, and supplies
§ Sales staff salaries and portions of the
building assigned to Sales should be allocated
to Selling Expense, not G&A
Interest on projects (Software) for internal use is not expensed, but instead is..
capitalized