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26 Cards in this Set
- Front
- Back
comprehensive income definition
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change in equity of a business enterprise
during an accounting period from transactions and other events and circumstances from nonowner sources |
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comprehensive income equation
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net income (revenues, expenses) + gains - losses + other comprehensive income
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revenues
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inflows or other enhancements of assets of an entity or settlements of its liabilities
from delivering or producing goods, rendering services, or other activities constitute the entity's ongoing major or central operations |
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expenses
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outflows or other using up of assets or incurrences of liabilities
from delivering or producing goods, rendering services, or carrying out other activities constitute the entity's ongoing major or central operations |
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gains
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increases in equity
from peripheral or incidental transactions with non-owners |
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losses
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decreases in equity
from peripheral or incidental transactions with non-owners |
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concept 5 when do we recognize revenues/gains?
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when realized or realizable AND earned
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realized
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converted to cash or claims to cash
cash or a/r |
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realizable
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assets received are readily convertible into known amounts of cash or claims to cash
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readily convertible
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interchangeable units w/quoted prices in an active market that can easily absorb the units
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earned
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the goods and services associated with the revenue have been provided
earnings process of the firm is substantially complete |
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revenue is realized and earned when:
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persuasive evidence of an arrangement exists
delivery has occurred or services have been rendered the seller's price to the buyer is fixed or determinable collectibility is reasonably assured |
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recognize revenue at point of sale/delivery when right of return exists if:
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seller's price is substantially fixed/determinable
buyer has paid or is obligated to pay; obligation not contingent on resale obligation not changed in event of theft or physical destruction of product buyer for resale has economic substance apart from seller seller has no future significant obligation to bring about resale amount of returns can be reasonably estimated |
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returns are not reasonably measurable if
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product's value is susceptible to significant external factors
right of return exists over a relatively long period of time little historical evidence exists under current conditions transactions are relatively unique and small in number |
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multi-element arrangements
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multiple goods/services bundled together for one price
delivered/provided to customer at different times customer can have return rights or cancellation rights before all elements are delivered |
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completed contract method
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defer all revenue and costs during production
recognize all construction revenue and costs of construction when the contract is completed recognize loss immediately |
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percentage of completion method
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recognize a portion of the estimated gross profit each period during construction
recognition based on progress to date and estimated costs to complete the project recognize losses immediately |
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contract
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agreement by two or more parties that creates enforceable obligations
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rights
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a claim to customer consideration
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performance obligation
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obligation to provide goods or services to customer
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Steps to new revenue recognition
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is there a contract?
identify the rights & obligations determine transaction cost "total consideration" allocate transaction cost to performance obligation recognize revenue when performance obligation is satisfied |
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account for multiple performance obligations separately if
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assets underlying obligation are distinct AND are provided at different times
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rights > obligations
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contract is asset
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rights < obligation
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contract is liability
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when to recognize revenue (new proposal)
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when contract asset increases or contract liability decreases from satisfaction of performance obligation
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when is performance obligation satisfied?
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when underlying asset is provided to customer and customer controls the benefit
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