RSM221H1 Lecture Notes - Lecture 1: Consignee, Cash Flow, John Wiley & Sons
Document Summary
As noted in chapter 2, revenues are increases in economic resources, either by inflows or other enhancements of an entity"s assets or by settlement of its liabilities, which result from an entity"s ordinary activities. As such, revenue is an increase in assets, a decrease in liabilities or some combination of the two. Based on those definitions, the contract-based model involves recognizing revenue when the entity has a right to payment and satisfies the performance obligation. By focusing on changes in assets and liabilities, the contract-based approach does not abandon the earnings approach. On the contrary, the iasb and fasb feel that focusing on changes in assets and liabilities will bring discipline to the earnings approach so that entities apply revenue recognition principles more consistently. Under the earnings approach, the concern is only about recognizing revenue from the sales contract. is concerned about both the. The contract-based approach recognition of the sales contract and the related revenue.
