financial ratios over a series of reporting periods. A horizontal analysis was conducted for Xerox and HP for the period of 1997 to 2000. Some noticeable differences were found in comparison of the two companies’ results. First, Xerox’s revenue decreased while HP’s revenue increased dramatically over the four years. Xerox was having difficulties in adapting to the competition driven by rapid technological advances. Second, due to the net losses and dramatic changes in net income, Xerox had negative cash
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Articulation Revenue-Expense Approach Since the 1930s, accounting policy has been mainly concerned with the definition, recognition, and measurement of income. Income is derived by matching costs (including arbitrary allocation such as deprieciation) to recognized revenue. Both the income statement and balance sheet are primarily governed by accounting rules of revenue recognition and cost matching, and these rules represent a revenue-expense orientation One consenquences of the revenue-expense approach
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The far-reaching implications of a new revenue model Highlights Management should evaluate existing business practices under the new model, including how product or service offerings are bundled and priced, and begin assessing the need to negotiate revised contract terms. Industry-specific accounting guidance will be eliminated under the new model and “industry practice” will need to be re-evaluated. Estimates that are required to apply the new model will often require the use of greater judgment
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to revalue your revenues and expenses in the following statements. Inappropriate revenue recognition criteria and policies (should change revenue recognition method or change the allowance estimation, 2011 allowance amount should be larger than 2010 due to larger AR and the difficulty that the artist been through) WAG records revenue from artwork sales when the Company and customer agree upon a selling price. This criterion does not conform to U.S. GAAP, which requires revenue be recognized when
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transactions or events, which may result in a transfer of assets or provision of services. Embody a duty or responsibility Entity has little or no discretion to avoid the duty The transaction that obliges the entity has occurred Measurement and recognition: financial liabilities are typ `ically recognized initially at their FV. After acquisition, most financial liabilities that are discussed in this chapter are accounted for at their amortized cost. Consistent with the cost based method: Transaction
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total annual amortization of R&D that has been capitalized until year 3. 3. What would you suggest to the managers of the company, with regard to possible modifications in their accounting policies? (For purposes of this question, ignore the revenue creation potential of R&D to emphasize the mechanical aspects of the procedure of R&D capitalization. In doing so, we implicitly acknowledge that Granados considers capitalization of R&D for the sole purpose of managing short-term earnings). The
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discount or incentive program to increase sales near the end of a quarter when revenue targets are not being met. Another example of operating decisions would be whether to invest in new equipment or hire additional employees. Companies have to make a decision constantly. The operating decision process is called economic earnings management, because it attempts to manage the cash flows. Therefore, the revenues and expenses associated with operations. Whereas, the bad earnings management
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marginal profit, more units need to be sold. Situation Analysis Classic Knitwear, Inc. (Classic) is a publicly traded company that was established in 1995 as a manufacturer/distributor of unbranded casual knit apparel. In 2005 Classic reported revenues of $550 million in it’s U.S. domestic sales, however in September 2006 Chief Marketing Officer Brandon Miller released Classic’s plan to introduce a new line of insect repellent clothing in order to increase gross margins. After conducting a SWOT
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Online Brandywine Homecare 2 Construct Brandywine’s 2007 Income Statement An income statement is the amount of revenue earned and expenses incurring by a business over a period of time. The income statement is separated into two parts, the revenue or moneys coming into a business and the expenses or the money going out of the business. Brandywine’s 2007 Income Statement Revenue $12,000,000 Operating Expenses: Salaries Expense
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1 Financial Reporting Overview Chapter 1 is an overview chapter covering accounting users, financial reporting, GAAP, accounting organizations, the conceptual framework, accounting careers, and ethics. The topics are wide ranging and very heavy on the new terminology side of things. Although it is a good chapter for introductory purposes, the concepts and organizations covered are so extensive that it will make a good chapter to come back to later, or at the end of intermediate accounting
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