1:RELEVANCE: Information should be relevant to the decision making needs of the user. Information is relevant if it helps users of the financial statements in predicting future trends of the business (Predictive Value) or confirming or correcting any past predictions they have made (Confirmatory Value). Same piece of information which assists users in confirming their past predictions may also be helpful in forming future forecasts. Example: A company discloses an increase
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8 million as a current revenue was that this part of the contract was related to the delivery of the software. Since the product was shipped by the September 30th year-end‚ Longeta thought that they were allowed to do this under the revenue recognition principle. The reasoning for the $1.2 million being recorded as deferred revenue was that this amount corresponded to updates and technical support services which had not been performed at the year-end. This deferred revenue is listed on the liabilities
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are needed for the hardware to work perfectly‚ it cannot be within the scope of ASC 985-605. 2.) On the basis of the response to Question 1‚ discuss the revenue recognition accounting literature that would be applied to each unit of accounting in the February 1‚ 2012‚ arrangement. Provide the cumulative revenue recognized and deferred revenue balance related to the Buffett arrangement as of April 30‚ 2012. Coconut’s February 1‚ 2012 arrangement with Buffet is within the
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determined that the standalone relative selling price of the training services and additional PCS were $3‚000 and $2‚000‚ respectively. At the time of execution of this agreement‚ the customer management system had been delivered and all other revenue recognition criteria related to the system were met. The training services are scheduled to begin on June 1‚ 2012. Required: 1. Is Coconut’s February 1‚ 2012‚ arrangement with Buffett within
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Case 06-12 Outsourcing Services‚ Inc. Outsourcing Services‚ Inc. (OSI)‚ a SEC registrant‚ provides a variety of EDP and payroll processing services to third parties. OSI recently has introduced a new service line to provide product help-line support services through customer service representatives (CSRs) who are employees of OSI. On January 1‚ 2004‚ OSI entered into a service contract with Company X. Pursuant to the terms of the contract‚ OSI’s CSRs will provide technical support for Company X’s
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time of sale‚ Essential should record as additional cost of goods sold‚ not as a reduction in revenue‚ because the free product does not represent a return‚ refund‚ or rebate of a portion of the sales price paid by the customer. Point and Loyalty Programs Customers can redeem specified quantities of points for awards such as free or discounted products. For this situation‚ Essential should not deferred revenue related to points awarded to customers. Part Two: Development cost Application Development
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000 59.52% 2013 4‚250‚000 0 4‚250‚000 100.00% 1‚619‚200 1‚669‚200 -50‚000 Cost Incurred to Date Estimated Costs Total Estimated Costs % Completed Revenue Expense Gross Profit 400‚000 1‚980‚800 350‚000 2‚230‚800 50‚000 -250‚000 2011 Account 1) Record Construction Costs CIP Various Accounts 2) Record Revenue Construction Expense CIP Revenue 3) Billings A/R Billings on CIP Dr 350‚000 350‚000 Cr 2012 Dr 2‚150‚000 Cr 2013 Dr 1‚750‚000 Cr 2‚150‚000 1‚750‚000 350‚000 50‚000
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Overlook Video Stores Inc. (OVS) To: Ms. Alice Hartford‚ Partner From: CA‚ Audit Senior Re: Planning for the year end 2009 of OVS and requested control deficiency information Engagement Overview The purpose of this memo is to document the planning of the financial statement audit st engagement of our client Overlook Video Stores Inc. (OVS) for the year ended December 31 ‚ 2009. OVS has been our client since its inception in 1998. This year’s audit will commence January‚ 2010‚ th
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Revenue Recognition: IFRS and FASB Convergence With the growth of international business there is a need to standardize financial statements globally. Presently there are “approximately 120 foreign private issuers currently that report to the Commission using IFRS financial statements.” By standardizing accounting practices investors will be able to make informed decisions based on comparability and accuracy of financial statements. The SEC released this statement in 2008‚ “We believe that
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a) -Revenues are inflows of assets or settlements of liabilities or both. Revenues come from activities of the entity’s central operations. -Gains are increases in net assets and from peripheral or incidental transactions of an entity. -The difference between gains and revenues depend to a great extent on the typical activities of a company. For example‚ when McDonald’s sells a hamburger‚ it records the selling price as revenue. However‚ when Mc Donald’s sells land‚ it records any excess of
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