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83 Cards in this Set

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Assets
Probable future economic benefits that are obtained or controlled by a particular entity as a result of past events* or transactions**
*Event: something that happens to an entity, and it can occur either externally or internally.

**Transaction: an event that occurs external to the entity and typically involves a transfer of value from one entity (entities) to another.
Liabilities
Probable future sacrifices of economic benefits that an entity faces for obligations to provide services or transfer assets due to past events or transactions.
Revenues
Increases of assets or reductions of liabilities (and possibly both) during a period of time. Stem from the rendering of services, delivering of goods, or any other activities that may constitute the major ongoing or central operations of an entity.
Revenue Recognition (GAAP)
Should be recognized when it is realized (or realizable) and when it is earned.
Revenue Recognition (GAAP)

Requirements for Contracts (4)
1. Persuasive evidence of an arrangement exists (signed contract)
2. Delivery has occurred or services have been rendered (risk & rewards transfer)
3. The price is fixed and determinable (no price contingencies)
4. Collection is reasonably assured (standard collection terms)
Revenue Recognition (GAAP)

Requirements for Sale of Products or Disposal of Other Assets
Recognized on the date of the sale (the delivery date). Generally the following criteria apply for a sale:
1. Delivery of goods or setting aside goods ordered and/or
2. Transfer of legal title
Revenue Recognition (GAAP)

Allowing Others the Use of Entity Assets
Recognized when the assets are used (as time passes)

Ex's: interest revenue, royalty revenue, and rent revenue
Revenue Recognition (GAAP)

Services
Recognized in the period the services have been rendered and are able to be billed by the entity.
Revenue Recognition (GAAP)

Objectivity
The reason for waiting for the sale to take place is "objectivity," to minimize tentativeness.
Revenue Recognition (IFRS)

Sale of Goods
Recognized when all of the following have been met:

1. Revenue and costs incurred for the transaction can be measured reliably.
2. It is probable that economic benefits from the transaction will flow to the entity.
3. The entity has transferred to the buyer the significant risk and rewards of ownership.
4. The entity doesn't retain managerial involvement to the degree associated with ownership or control over the goods sold.
Revenue Recognition (IFRS)

Rendering of Services
-Recognized using the percentage of completion method when the outcome of the transaction can be estimated reliably. Can be estimated reliably when:
1. Revenue and costs for the transaction can be measured reliably.
2. It is probable that economic benefits from the transaction will flow to the entity.
3. The stage of completion at the end of the period can be measured reliably.
Revenue Recognition (IFRS)

Interest, Royalties, and Dividends
Recognized when:
1. Revenue can be measured reliably.
2. It is probable economic benefits from the transaction will flow to the entity.*
*Interest revenue is recognized using the effective interest method.

Royalties are recognized on the accrual basis

Dividends are recognized when the shareholders' rights to receive payment are established.
Revenue Recognition (IFRS)

Construction Contracts
Contract revenues and costs are recognized as revenue and expenses using the percentage of completion method when the outcome of the construction contract can be estimated reliably. Can be estimated reliably when:
1. The contract revenue and costs attributable to the transaction can be measured reliably
2. It is probable that economic benefits from the transaction will flow to the entity
3. Both the contracts to complete the contract and the stage of contract completion at the end of the period can be measured reliably.*
*An expected loss on a construction contract is recognized immediately as an expense.
Multiple Element Arrangements (GAAP)
When a sales contract includes multiple products or services, the FV of the contract must be allocated to the separate contract elements. Revenue is then recognized separately for each element based on the revenue recognition appropriate for each element.
Exceptions and Other Special Accounting Treatments

Deferred Credits
When cash is received before it is earned, a deferred credit (unearned/deferred revenue) is reported. A deferred credit is recognized as revenue as it is earned.

-Examples: (1) Unearned interest income, (2) Unearned interest income, (3) Unearned royalty income.
Exceptions and Other Special Accounting Treatments

Installment Slaes
Revenue is recognized as collections are made. Used when ultimate realization of collection is in doubt.
Exceptions and Other Special Accounting Treatments

Cost Recovery Method
No profit is recognized on a sale until all costs have been recovered.
Exceptions and Other Special Accounting Treatments

Non-monetary Exchanges
The recognition of revenue depends upon the type of exchange.
Exceptions and Other Special Accounting Treatments

Involuntary Conversions
The involuntary conversino due to fire, theft, etc., of a non-monetary asset to cash would result in a gain or loss for financial reporting purposes.
Exceptions and Other Special Accounting Treatments

Net Method of Accounting for Trade (Sales) Discounts
Sales are recorded net of any discounts; therefore, A/R at year-end foes not include the discount offered. If the discount is not earned, the sales discount amount is recorded as "other income," and cash or A/R is debited at that time.
Exceptions and Other Special Accounting Treatments

Percentage-of-Completion Contract Accounting
Revenue is recognized as "production takes place" for long-term construction contracts having costs that can be reasonably estimated. If costs cannot be reasonably estimated, then the "completed contract method" must be used.
Expenses
Reductions of assets or increases of liabilities (& possibly both) during a period of time. Stem from the rendering of services, delivering of goods, or any other activities that may constitute the major ongoing or central operations of an entity.

-Should be recognized according to the matching principle.
Realization
Occurs when the entity obtains cash or the right to receive cash (from the sale of assets) or has converted a non-cash resource into cash.
Recognition
The actual recording of transactions and events in the F/S's.
Matching Principle
Expense must be recognized in the same period in which the related revenue is recognized. Matching of revenues and costs is the simultaneous or combined recognition of the revenues and expenses that results directly and jointly from the same transactions/events.*
*For those expenses that do not have a cause and effect relationship to revenue, another systematic and rational approach to expense recognition should be used (amortization/depreciation of long-lived assets and the immediate expensing of certain administrative costs, referred to as period costs (no future benefit))
Accrual Accounting
Required by GAAP and is the process of employing the revenue recognition rule and the matching principle to the recognition of revenues and expenses.*
*I/S impact, no current cash impact.
Deferral
Of revenues/expenses, will occur when cash is received or expended but is not recognizable for F/S purposes. Typically results in the recognition of a liability or a prepaid expense.*
*No I/S impact, B/S impact (cash impact).
Accrued Assets (or Revenues)
The recognition of an accrued asset (ex: interest receivable) represents revenue recognized or earned through the passage of time but not yet paid to the entity.*
*Debit A/R, Credit Accrued Revenues
Accrued Liabilities (or Expense)
Represent expenses recognized or incurred through the passage of time but not yet paid by the entity (ex: accrued interest payable, accrued wages, etc.)*
*Debit Accrued Expenses, Credit Accrued Liability (A/P)
Estimated Liabilities
Represent the recognition of probable future charges that result from a prior act (ex: the estimated liability for warranties, trading stamps, or coupons).*
*Debit Accrued Expense, Credit Accrued Liability
Expired Costs
(Expenses) that expire during the period and have no future benefit (ex: the residual value or right to certain future revenues)*
1. Insurance Expense: is an indirect expense and is systematically allocated to the period for which benefit is received.
2. COGS: directly allocated to the periods in which the sales take place which matches the cause and effect of the transaction.
3. Period Costs: costs expiring in the period incurred (ex: selling, general, and administrative expenses)
*Expense on the I/S
Unexpired Costs
(ex: fixed assets and inventory) Should be capitalized and matched against future revenues. If future revenues are not certain or there is no residual value, then those costs should be expenses as expired costs.*
*Stay on B/S for now
Prepaid Expenses (Current Assets)
*1. Residual Value: prepaid expenses relate to expenditures with a residual value (ex: prepaid insurance w/ a cancellation value).
2. Future Right to Services: may also occur where there exists a future right to services (ex: a service contract w/ no cancellation value)
*Debit Prepaid Expense, Credit Cash

-On the B/S only
Deferred Charges
*1. Not Charges to a Tangible Asset: deferred charges result from expenditures or accruals that cannot be charged to a tangible asset, but that do pertain to future operations (ex: bond issue costs).
2. Intangible Assets and Non-current Prepaid Items
*Debit Deferred Charge, Credit Cash/Asset

-On the B/S only
Deferred Credits (Unearned/Deferred Revenue)
1. Deferred Credits represent future income contracted for and/or collected in advance.
2. Have not yet been earned by the passage of time or other criteria.
3. Located in the liability section of the B/S.
Royalty Revenue
1. Royalty revenue is recognized when earned.
2. Reporting of royalty revenue requires accrual of the provision for revenues based on estimated sales.*
*Paid in advance journal entries (B/S only)
Debit Cash, Credit Unearned Royalty

*Earned/I/S Impact
Debit Unearned Royalty, Credit Earned Royalty
Unearned Revenue
Revenue received in advance is recorded as a liability b/c it is an obligation to perform a service in the future and is reported as revenue in the period in which it is earned.
Revenue Recognition when the Right of Return Exists
Recognized at the time of sale only if all required conditions are met (otherwise revenue is deferred):
1. Sales price is substantially fixed at the date of sale
2. Buyer assumes all risks of loss b/c the goods are considered in their possession
3. Buyer has paid some form of consideration
4. Product sold is substantially complete
5. The amount of future returns can be reasonably estimated
Franchises
-Operations include a franchisee that receives the right to operate one of more units of a franchisor's business. Franchise accounting involves 2 types of fees:
1. Initial Franchise Fees: paid by the franchisee for receiving initial services from the franchisor*
2. Continuing Franchise Fees: received for ongoing services provided by the franchisor to the franchisee. Usually calculated on a percentage of franchise revenues.**
*Revenue when "substantially performed"
**Fees should be reported by the franchisor when they are earned.
Franchisor Accounting (Franchise Fee Revenue)
1. Unearned Revenue: PV of any contract relating to future services should be recorded as unearned revenue which is recognized as revenue once substantial performance on such future services has occurred.
2. Earned Revenue: franchisor should report revenue from initial franchise fees when all material conditions of the sale have been "substantially performed."*

-Generally, the conditions of the sale are not considered to be substantially performed until the franchisee's first day of operations, unless franchisor can demonstrate otherwise.
Generally means- (1) Franchisor has no obligation to refund any payment received, (2) initial services required of the franchisor have been performed, (3) All other conditions of the sale have been met.
Franchisor Accounting

Other Recognition Methods
1. Installment or cost recovery percentage methods may be used under certain circumstances
2. These methods shall be used for earlier recognition of the initial franchise fee only when: (1) revenue is collectible over an extended period of time, and (2) there is no reasonable basis for estimating collectibility.
Intangible Assets
-Long-lived legal rights and competitive advantages developed or acquired by a business enterprise.
-Typically acquired to be used in operations of a business and provide benefits over several accounting periods.
-Differ significantly in their characteristics, useful lives, and relationship to operations of an enterprise and are classified accordingly.
Intangible Assets

Identifiability
Identifiability: may be either specifically or not specifically identifiable (Common Ex's: patents, copyrights, franchises, trademarks, and goodwill).
Intangible Assets

Manner of Acquisition
1. Purchased: recorded as an asset at cost. Legal and registration fees incurred to obtain an intangible asset should also be capitalized.
2. Internally developed: expensed against income when incurred b/c GAAp prohibits the capitalization of R&D costs.*
3. Exception is that certain costs associated w/ intangibles that are specifically identifiable can be capitalized such as: (1) legal fees and other costs related to a successful defense of the asset**, (2) registration or consulting fees, (3) design costs, (4) other direct costs to secure the asset.
*Ex's: trademarks, goodwill from advertising, cost of developing/maintaining/restoring goodwill
**Unsuccessful defense is expensed and asset is tested for impairment.
Intangible Assets

Expected Period of Benefit
Classification of the intangible asset depends upon whether the economic life can be determined or is indeterminable.
Intangible Assets

Separability
Classification depends upon whether the asset can be separated from the entity (ex: patent) or is substantially inseparable from it (ex: trance name, goodwill).
IFRS vs. U.S. GAAP

Intangible Assets
Under IFRS research costs related to an internally developed intangible asset must be expensed but an intangible asset from development is recognized if the entity can demonstrate:
1. Technological feasibility
2. Entity intends to complete the intangible asset
3. Entity has the ability to use or sell the asset
4. Asset will generate future economic benefits
5. Adequate resources are available to complete the development and sell or use the asset.

-The entity can reliably measure the expenditure attributable to the development of the intangible asset.
Intangible Assets

Capitalization of Costs
A company should record the cost of intangible assets acquired from other enterprises or individuals in an "arm's length" transaction as assets.
Intangible Assets

Capitalization of Costs- Cost Measurement
Measured by-
1. Amount of cash disbursed or the FV of other assets distributed
2. PV of amounts for liabilities incurred
3. FV of consideration received for stock issued

-Cost may be measured by the FV of the consideration given or by the FV of the property acquired, whichever is more clearly evident.

-The cost of unidentifiable intangible assets* is measured as the difference between the cost of the group of assets or enterprise acquired and the sum of the costs assigned to identifiable assets acquired, less liabilities assumed.**
*The residual value
**The cost of identifiable assets should not include goodwill.
Intangible Assets

Amortization
Value of intangible assets eventually disappears, therefore, the cost of each type of intangible asset should be amortized by systematic charges over the period estimated to be benefited.*
*A patent is amortized over the shorter of the estimated life or remaining legal life.
Intangible Assets

Amortization Method
-Straight-line method should be applied unless another systematic method is more appropriate.
-Method should be disclosed in the notes to the F/S's.
-Expenses that increase the useful life of the intangible asset require an adjustment to the calculation of annual amortization.
Intangible Assets

Amortization of Goodwill
-Amortization of purchased goodwill is not permitted. The required approach is to test goodwill for impairment at least annually.*
*No amortization (indefinite life)
Intangible Assets

Amortization- Miscellaneous Rules
1. Worthless: write off the entire remaining cost to expense if an intangible asset becomes worthless during the year.*
2. Impairment: write down the intangible asset and recognize an impairment loss.*
3. Change in Useful Life: remaining net BV is amortized over the new remaining life.**
4. Sale: if intangible asset is sold, simply compare its carrying value at the date of sale with the selling price to determine the gain/loss.***
*Expense
**Recalculate amortization
***Calculate gain/loss
Intangible Assets

Amortization- Income Tax Effect
Amortization of acquired intangible assets that are not specifically identifiable (ex: goodwill) is deductible over a 15-year period in computing income taxes.*
*May create a temporary difference, and inter-period allocation of income taxes is appropriate.
Intangible Assets

Valuation- U.S. GAAP
Under U.S. GAAP, finite life intangible assets are reported at cost less amortization and impairment. Indefinite life assets are reported at cost less impairment.
Intangible Assets

Valuation- IFRS
Under IFRS, intangible assets can be reported under either the-
1. Cost Model: reported at cost adjusted for amortization (finite life only) and impairment.
2. Revaluation Model: initially recognized at cost and then reevaluated to FV at a subsequent revaluation date. Revaluated intangible assets are reported at FV on the revaluation date adjusted for subsequent amortization (finite life only) and subsequent impairment.*

-Revaluation model carrying value = FV on revaluation date - Subsequent amortization - subsequent impairment
*Revaluations must be performed regularly. If an intangible asset is accounted for using this method, all other assets in its class must also be revalued unless there is no active market for the intangible assets.
Intangible Assets

Revaluation Losses
-(FV on revaluation date < carrying value before revaluation) Reported on the I/S unless the revaluation loss reverses a previously recognized revalution gain.*
*Exception: a revaluation loss that reverses a previously recognized revalution gain is recognized in OCI and reduces the reclamation surplus in accumulated OCI.
Intangible Assets

Revaluation Gains
-(FV on revaluation date > carrying value before revaluation) Reported in OCI and accumulated in equity as revaluation surplus, unless the revaluation gain reverses a previously recognized revaluation loss.*
*Exception: revaluation gains are reported on the I/S to the extent that they reverse a previously recognized revaluation loss.
Intangible Assets

Impairment
If revalued intangible assets subsequently become impaired, the impairment is recorded by first reducing any revaluation surplus in equity to zero with further impairment losses reported on the I/S.
Franchisee Accounting

Initial Franchise Fees
The PV of the amount paid (or to be paid) by a franchisee is recorded as an intangible asset on the B/S and amortized over the expected period of benefit of the franchise (expected life).*
*Intangible asset and amortize.
Franchisee Accounting

Continuing Franchise Fees
Should be reported by the franchisee as an expense and as revenue by the franchisor, in the period incurred.
Start-Up Costs

In General and For Book Purposes
-Expenses incurred in the formation of a corporation (ex: legal fees) are considered organizational costs and should be expensed when incurred.

-For Book Purposes: include one-time activities associated with: (1) Organizing a new entity, (2) Opening a new facility, (3) Introducing a new product or service, (4) Conducting business in a new territory or w/ a new class of customer, (5) Initiating a new process in an existing facility.*
*Does not include costs associated with: (1) Routine, ongoing efforts to refine, enrich, or improve the quality of existing products, services, processes, or facilities, (2) Business mergers or acquisitions, (3) Ongoing customer acquisition.
Start-Up Costs

For Income Tax Purposes
A business may elect to deduct up to $5,000 each of organizational expenditures and start-up costs. Each $5,000 amount is reduced by the amount by which organizational/start-up costs exceeds $50,000 respectively. Any excess is amortized over 180 months (beginning w/ the month in which the active trade or business begins).*
*May create a temprorary difference and inter-period allocation of income taxes is appropriate.
Goodwill
The representation of intangible resources and elements connected with an entity. Means capitalized excess earning power.
Goodwill

Calculation (2)
1. Acquisition Method: goodwill is the excess of an acquired entity's FV over the FV of the entity's net assets, including identifiable intangible assets.
2. Equity Method: involves the purchase of a company's capital stock. Is the excess of the stock purchase price over the FV of the net assets acquired.
Goodwill

Maintaining
Costs associated with maintaining, developing, or restoring goodwill are not capitalized, they are expensed. In addition, goodwill generated internally or not purchased in an arm's length transaction is not capitalized as goodwill.
Research and Development Costs
-Research is the planned efforts of a company to discover new information that will help either to create a new product, service, process, or technique or significantly improve the one in current use.
-Development takes the findings generated by research and formulates a plan to create the desired item or to significantly improve the existing one.
Research and Development Costs

Accounting For (U.S. GAAP)
-The only acceptable method of accounting for R&D costs is a direct charge to expense except for:
1. Materials, equipment, or facilities that have alternate uses (capitalize and depreciate assets over their useful lives).
2. R&D costs of any nature undertaken on behalf of others under a contractual agreement.*

-Conclusion for charging most R&D costs to expense is the high degree of uncertainty of any future benefits.
-Disclosure is required in the F/S's or notes of the amount of R&D charged to expense for the period.
*Purchaser will expense as R&D the amount paid, and the provider will expense the costs incurred as cost of sales.
Items Not Considered Research and Development
1. Routine periodic design changes to old products or troubleshooting in production stages
2. Marketing research
3. Quality control testing
4. Reformulation of a chemical component
IFRS vs. U.S. GAAP

Research and Development Costs
Under IFRS, research costs must be expensed but development costs may be capitalized if certain criteria are met, as stated in the discussion of intangible assets.
IFRS vs. U.S. GAAP

Computer Software Development Costs
IFRS does not provide separate guidance regarding computer software development costs. Under IFRS, they are internally generated intangibles. Research costs must be expensed and development costs may be capitalized if certain criteria are met (see discussion of intangible assets)
Computer Software Development Costs

To be Sold, Leased, or Licensed
1. Technological Feasibility: established upon completion of (1) a detailed program design, or (2) completion of a working model.
2. Accounting for Costs: (1) Expense costs incurred until technological feasibility has been established for the product. (2) Capitalize costs incurred after technological feasibility has been established up to the point that the product is released for sale.* (3) Costs incurred to actually produce the product, are product costs charged to inventory.
3. Balance Sheet: capitalized software costs are reported at the lower of cost or market where market is equal to NRV.
*Amortization of Capitalized Software Costs: Annual amortization (on a product basis) is the greater of-
1. Percentage or revenue = Total capitalized amount x (Current gross revenue for period ÷ Total projected gross revenue for product)
2. Straight Line = Total capitalized amount x (1 ÷ Estimate of economic life)
Computer Software Development Costs

Developed Internally or Obtained for Internal Use Only
1. Expense costs incurred for the preliminary project state and costs incurred for training and maintenance.
2. Capitalize costs incurred after the preliminary project state* and for upgrades and enhancements including: (1) direct costs of materials or services, (2) costs of employees directly associated w/ the project, (3) interest costs incurred for the project.
3. Capitalized costs should be amortized on a straight-line basis
4. If software previously developed for internal use only is subsequently sold to outsiders, proceeds received should be applied first to the carrying amount of the software, then recognized as revenue.
*Technological feasibility
Impairment
The carrying amount of intangibles (including goodwill) and fixed assets held for use and to be disposed of needs to be reviewed at least annually or whenever events or changes in circumstances indicates that the carrying amount may not be recoverable.
Impairment of Intangible Assets Other than Goodwill (U.S. GAAP)
Impairment test applied is determined by the asset;s life. If an intangible asset has a finite life, it is amortized over that life. If it has a indefinite life, it is not amortized.
Impairment of Intangible Assets Other than Goodwill (U.S. GAAP)

Intangible Assets with Finite Lives
2 Steps:
1. The carrying amount of the asset is compared to the sum of undiscounted CF's expected to result from the use of the asset and its eventual disposition.
2. If the carrying amount exceeds the total undiscounted future CF's, then the asset is impaired and an impairment loss equal to the difference between the carrying amount of the asset and its FV is recorded.*
*Step 1: Determining the impairment--use undiscounted future net CF's.
Step 2: Amount of impairment--use FV (discounted CF).
Impairment of Intangible Assets Other than Goodwill (U.S. GAAP)

Intangible Assets with Indefinite Lives
Generally not possible to estimate total future CF's. As a result, an intangible asset with an indefinite life is tested for impairment by comparing the FV of the intangible asset to its carrying amount. If the asset's FV < Carrying amount, an impairment loss is recognized in an amount equal to the difference.
Impairment of Intangible Assets Other than Goodwill (U.S. GAAP)

Reporting an Impairment Loss
-Reported as a component of income from continuing operations (I in IDEA) before income taxes, unless the impairment loss is related to discontinued operations.
-The carrying amount of the asset is reduced by the amount of the impairment loss.
-Restoration of previously recognized impairment losses is prohibited, unless the asset is held for disposal.
IFRS vs. U.S. GAAP

Impairment of Intangible Assets Other than Goodwill (U.S. GAAP)
-Under IFRS, an impairment loss for an intangible asset other than goodwill is calculated using a on-step model in which the carrying value is compared to the intangible asset's recoverable amount.
-Recoverable amount is defined as the greater of the asset's FV less costs to sell and the asset's value in use.*
-IFRS allows the reversal of impairment losses.
*Value in use is the PV of the future CF's expected from the intangible asset.
Goodwill Impairment- U.S. GAAP
Calculated at a reporting unit* level. Impairment exists when the carrying amount of the reporting unit goodwill exceeds its FV.
*Reporting Unit: an operating segment, or one level below an operating segment. The goodwill of one reporting unit may be impaired, while the goodwill for other reporting units may or may not be impaired.
Goodwill Impairment- U.S. GAAP

Evaluation of Goodwill Impairment
2 major steps-
1. Identify potential impairment by comparing the FV of each reporting unit with its carrying amount, including goodwill.
-Assign assets acquired and liabilities assumed to the various reporting units. Assign goodwill to the reporting units.
-Determine the FV's of the reporting units and of the assets and liabilities of those reporting units.
-If the FV of a reporting unit < carrying amount, there is potential goodwill impairment. The impairment is assumed to be due to the reporting unit's goodwill.
-If the FV of a reporting unit > carrying amount, there is no impairment loss and Step 2* is not necessary.
*2. Measure the amount of goodwill impairment loss by comparing the implied value of the reporting unit's goodwill w/ the carrying amount of that goodwill.
-Allocate the FV of the reporting unit to all assets and liabilities of the unit. Any FV that cannot be assigned to specific assets or liabilities is the implied goodwill of the reporting unit.
-Compare the implied FV of the goodwill to the carrying value of the goodwill. If the implied FV < carrying amount, recognize goodwill impairment. Once the goodwill impairment loss has been fully recognized, it cannot be reversed.
IFRS vs. U.S. GAAP

Goodwill Impairment
-Under IFRS, goodwill impairment testing is done at the cash-generating unit (CGU)* level.
-Goodwill impairment test is a 1 step test in which the carrying value of the CGU is compared to the CGU's recoverable amount (future CF's expected form the CGU). An impairment loss is recognized to the extent that the carrying value exceeds the recoverable amount. The impairment loss is first allocated to goodwill and then allocated on a pro rata basis to the other assets of the CGU.
*CGU: the smallest identifiable group of assets that generates cash inflows that are largely independent of the cash inflows from other assets or groups of assets.
Correcting and Adjusting Accounts
Objective of an I/S presentation is to match related expenses w/ their revenues. This exercise includes typical audit-type adjustments related to the matching of expenses with revenues.