Control environment: (i) Insistent accounting policies or practices. (ii) Demands from senior management to augment revenues and earnings (iii) Absence of involvement by the accounting or finance department in transactions or in the supervision of arrangements with distributors. (Practice Alert 98-3 Revenue Recognition Issues) Matters needing special consideration: (i) an alteration in the revenue recognition policy of the company. (ii) Sales terms do not meet the terms with the usual policies of the company. (iii) Longer duration of anticipated payment terms or installment receivables. (iv) Important sales or volumes of sales which are recorded during the or near the culmination of the reporting period. (v) Putting into use substandard contracts or agreements. (vi) Transaction with related parties. In order to reduce the danger of inappropriate revenue recognition, the audit is required to be planned and implemented with a suitable extent of professional disbelief. At the time of planning the audit, the auditor must get a sufficient appreciation of the business and industry of the client, the products of the company, its marketing and sales policies and strategies, the internal control structure,...
(Practice Alert 98-3 Revenue Recognition Issues)
AUS 2016-08 Analysis The Accounting Standards Update (ASU 2016-08) covers the topic "Revenues from Contracts with Customers". This move was made to bring the FASB standards more in line with IASB standards, as part of the effort to converge US GAAP with IFRS standards. The main provisions of this update are as follows. "An entity should recognize revenue to depict the transfer of promised goods and services to customers in an
Accounting Concepts Revenue Recognition: Its Relevance and Significance In the words of Kimmel, Weygandt and Kieso (2008), "the revenue recognition principle requires that companies recognize revenue in the accounting period in which it is earned." Unlike is the case in the cash basis of accounting, revenue under the accrual accounting basis is recognized on the sale of a certain commodity or the performance of a given service. Under the cash basis
GAAP is a set of specific common guidelines, provided by the institutions such as the Financial Accounting Standards Board, the American Institute of Certified Public Accountants and the Securities and Exchange Commission, about "acceptable accounting practices" These acceptable practices should not necessarily be regarded as a set of ground rules. In fact, it is a common denominator, useful when foreign firms, especially auditing companies, proceed to financial verifications. The GAAP provide
Case Study on Larson Industries Larson Industries Research Revenue Recognition Issues Introduction Larson Industries is one of the firm's biggest clients. The company partakes in the manufacturing of carpentry and other premium handheld and mechanical tools. Larson Industries has entered into an agreement with Dynamic Wholesale, Inc. regarding the sale of AM300, which is Larson's leading product in the industry. Multiple complex revenue recognition problems face this new Contract (McNellis, Barone, and Herbold,
" The determination for marketable security with respect to disproportionate distribution is accomplished by reducing the amount of marketable securities that is treated as money using the following steps: 1. The excess of the partner's share of net gain that would be recognized if all securities of the type distributed held by the partnership immediately before the transaction were sold at fair market value over 2. The partner's share of gain that would
Furthermore, capital gains normally tend to be spread across a wider income scale than many believe. According to the IRS Individual Income Tax Returns, Preliminary Data, 1992 federal income tax returns, 55% of returns claiming capital gains were from incomes of $50,000 or less, including a capital gain (Thorning, 1995). What this information appears to come down to is that the capital gains tax affects almost everyone, which happens
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