BU387 Lecture Notes - Lecture 10: Income Statement, Specific Performance
Document Summary
Seen primarily as in income statement approach to accounting for revenues. Focus is on measuring revenues and costs and recognizing revenues when earned. Performance occurs when an entity can measure the revenue (and costs) and when it has substantially accomplished what it must do to be entitled to the benefits of the revenues. The risks and rewards are transferred and/or the earnings process is substantially complete. When an entity sells goods, there is often one main act or critical event in the earnings process that signals substantial completion or performance. Some uncertainty remains, but its level is acceptable and revenues can be recognized under accrual accounting. Substantial completion normally occurs in business that sell goods at point of delivery. This is generally when the risks and rewards of ownership pass. If the earnings process has a critical event, it is often referred to as a discrete earnings process. Product earnings process: plant vines, fertilize/protect, harvest, ferment, bottle, ship, collect 16295$
