The proposed revenue recognition principle would require companies to restate prior years financial statements to reflect treatment under the new standard. The current revenue recognition principle recognizes revenue when the earnings process is complete and there is reasonable assurance that the company is going to collect on the asset. The main principle in the new standard says that a company is going to recognize revenue when the goods or services are transferred and the amount recognized is
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Those principles are revenue recognition principle and expense recognition principle. After discovering which transactions are applicable the information is input in the financial statements. Then the applicable information is written in a journal with explanations. Sometimes changes occur and when this happens one needs to understand the situations requiring adjustment journal entries. The revenue recognition principle requires the company to only recognize earned revenue in the accounting period
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| |Revenue: | | | Net patient services revenue | | | |$12,000,000 | | Total Revenue
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development expenses were incurred after technological feasibility was established, that the average product life was two years, and that the company begins amortizing software costs at the beginning of the following year. Estimate the effect of capitalizing software costs on Microsoft’s fiscal 1997, 1998, and 1999 income statements and balance sheets. 1995 1996 1997 1998 1999 R&D recognized on the I/S 860 1,326 1,863 2,601 2,970 These are the adjustments to 516 258 0 capitalize 60% of the R&D expense 796
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EXECUTIVE SUMMARY The Case Analysis concentrated on the accounting practices employed by Stirling Homex Corporation which is a result of the SEC’s clarification of the Company’s revenue recognition methods. Specifically, the analysis focused on the company’s revenue recognition, profit allocation, and capitalization of expense procedures. Overall, the analysis aimed to identify any discrepancies in the Stirling Homex’s financial statements that made the SEC question the accuracy and fairness of the
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CHAPTER 2 CONCEPTUAL FRAMEWORK UNDERLYING FINANCIAL ACCOUNTING Show Me the Earnings! The growth of new-economy business on the Internet has led to the development of new measures of performance. When Priceline.com splashed onto the dot-com scene, it touted steady growth in a measure called “unique offers by users” to explain its heady stock price. To draw investors to its stock, Drugstore.com focused on the number of “unique customers” at its website. After all, new businesses call for new performance
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Question 4: For a performance obligation that an entity satisfies over time and expects at contract inception to satisfy over a period of time greater than one year, paragraph 86 states that the entity should recognize a liability and a corresponding expense if the performance obligation is onerous. Do you agree with the proposed scope of the onerous test? If not, what alternative scope do you recommend and why? According to paragraph 86 and 87, a performance obligation is onerous if the lowest cost
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| | Revenues | Expenses | Net Income | January 1, 2010: | | | | | | | | | | Deliver iPhone to the customer | +500 (Cash) | | +500 (Deferred Revenue) | | | | | | | Remove iPhone from delivery | -350 (Inventory)+350 (Deferred Costs) | | | | | | | | | Total Impact on January 1, 2010 | +500 | | +500 | | | | | | | | | | | | | | | | | December 31, 2010: | | | | | | | | | | Recognize revenue of one year | | | -250 (Deferred Revenue) | |
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follows: * A new standard were introduce such as IFRS 6 Exploration for and Evaluation of Mineral Resources. * five Interpretations-IFRICs 1-5 * Amendments were made related to IAS 19 Employee Benefits, IAS 39 Financial Instruments: Recognition and Measurement and SIC-12 Consolidation-Special Purpose Entities * Amendments were made for other IFRSs resulting from those pronouncements together with editorial corrections. http://www.ifrs.org/Archive/Press-Relases-Archive/2005/Pages/IASB-publishes-complete-standards-for-2005
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research and development expenses were incurred after technological feasibility was established, 2) the average product life was two years, 3) the company had always capitalized these costs; and 4) the company begins amortization capitalized software costs at the beginning of the following fiscal year. Briefly speculate as to why Microsoft chose to expense all software costs as incurred rather than capitalizing a portion of these costs. Answer: Microsoft chose to expense instead of capitalizing
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