© 2000 American Accounting Association Accounting Horizons Vol. 14 No. 2 June 2000 pp. 235-250 Earnings Management: Reconciling the Views of Accounting Academics, Practitioners, and Regulators Patricia M. Dechow and Douglas J. Skinner Patricia M. Dechow is an Associate Professor and Douglas J. Skinner is a Professor, both at the University of Michigan. SYNOPSIS: We address the fact that accounting academics often have very different perceptions of earnings management than do practitioners
Words: 7836 - Pages: 32
Definition of Revenue (FASB Concepts Statement No. 6): Inflows or other enhancements of assets of an entity or settlements of its liabilities (or a combination of both) from delivery or producing goods, rendering services, or other activities that constitute the entity’s ongoing major or central operations. Separate definition for Gains Guidelines for Revenue Recognition The revenue recognition principle (FASB Concept Stmt. No. 5) provides that companies should recognize revenue 1) when
Words: 2795 - Pages: 12
Revenue Recognition Analysis One of this biggest disputed problems faced by auditors is the recognition of revenue. According to the FASB, companies recognize revenue when “a performance obligation is satisfied.” In other words, companies recognize revenue when it is realized or realizable and earned. Yet, the timing of realizable and earned revenue is different among companies. Amazon.com, the largest Internet based retailer in the United States, sells a wide variety of consumer electronics
Words: 502 - Pages: 3
Advanced Issues in Revenue Recognition CONTENT ANALYSIS OF END-OF-CHAPTER ASSIGNMENTS NUMBER TOPIC CONTENT LO ADAPTED DIFFICULTY TIME EST. AACSB AICPA BLOOM’S Q17-1 Revenue Recognition Recognition of revenue when the earnings process is not complete 1 ! Easy 5 Analytic Measurement Comprehension Q17-2 Revenue Recognition Distinguish between
Words: 22005 - Pages: 89
CHAPTER 18 REVENUE RECOGNITION IFRS questions are available at the end of this chapter. TRUE-FALSe—Conceptual Answer No. Description F 1. Recognition of revenue. T 2. Realization of revenue. T 3. Delayed recognition of revenue. F 4. Recognizing revenue when right of return exists. T 5. Recognizing revenue prior to product completion. F 6. Use of percentage-of-completion method. T 7. Input measure for contract progress. T 8. Reporting Construction in Process and Billings
Words: 15025 - Pages: 61
immediate feedback about how well they are doing. For example, management usually wants monthly reports on financial results, most large corporations are required to present quarterly and annual financial statements to stockholders, and the Internal Revenue Service requires all businesses to file annual tax returns. Many business transactions affect more than one of these arbitrary time periods. For example, a new building purchased by Bank of America or a new airplane purchased by Southwest Airlines
Words: 360 - Pages: 2
1. Is Eye Vision’s arrangement with Holland Hospital within the scope of ASC 985-605, Software: Revenue Recognition? In this case, the main content of the Eye Vision’s arrangement with Holland Hospital include embedded software medical equipment and an initial option to purchase a two-year separately priced maintenance agreement. In this case, because “Eye Vision has never sold, nor does it offer to sell, the Clear View Laser without the embedded software because the software is necessary to perform
Words: 1855 - Pages: 8
Revenue Recognition: Converge between U.S. GAAP and IFRS While the basic revenue recognition model under US GAAP and IFRS share some similarities, if we make a comparison under two systems, we may find quite a few differences. In general, IFRS has much less industry-specific guidance than does US GAAP. First, one of the main differences lies in timing of revenue recognition with respect to contracts criteria such as long-term construction or contingency. According to US GAAP, revenue must be realized
Words: 553 - Pages: 3
Codifications and quotations used in following scenarios 1) Service revenue should be recognized on a straight-line basis, unless evidence suggests that the revenue is earned or obligations are fulfilled in a different pattern, over the contractual term of the arrangement or the expected period during which those specified services will be performed, whichever is longer. (SAB Topic 13A3, Interpretive Response to ques.6) 2) Revenue should be deferred until the specifications have been achieved or
Words: 987 - Pages: 4
1. Membership revenue should be recognized when the membership fee is collected. Here Baber should use the earnings based approach. For memberships using a prepaid approach, they have not earned the revenue paid at the beginning of each term although they have collected the funds. Recognizing revenue at this point is against financial reporting best practices as there is uncertainty about whether or not the buyer will demand a refund at any given time. It falsely inflates revenue at present and
Words: 546 - Pages: 3
