Comparing The Old And New Standard, For Tax Purposes Essay

1097 Words Nov 22nd, 2015 5 Pages
In comparing the old and new standard, for tax purposes, one of the new rules provides guidance for gift card revenue recognition: when to recognize the income comes from the advance sales of gift cards. For tax purposes, taxpayers can choose either the cash or the accrual method of accounting. If the cash method is used, the income from advance sales of gift cards will be recognized in the same period. For the accrual method, the income might not be recognized in the same year it received. Since some gift card sales redeemed with another unrelated third party, the new guidance will allow taxpayers to use the accrual method to defer income received from gift cards for a later year after the year of receipt. If gift cards were issued for services is allowed to defer revenue up to one tax year following the sale.
Staff Accounting Bulletin (SAB) No. 101, Topic Revenue Recognition’s on the SEC’s website stated Revenue should not be recognized until it is realized or realizable and earned. (SEC 1999) Revenue is realized or realizable and earned is when all of these 4 criteria are met. Number one is Persuasive evidence of an arrangement exits. A substantial transaction that indicates a sale has been taken place. Best evidence of a sale is an arm’s length agreement between the seller and the buyer conducted according to the normal practice of both parties. Consignment of goods that have not yet sold does not constitute as a sale until the consignee sells the goods to a third…

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