BU387 Lecture Notes - Lecture 2: Revenue Recognition, Financial Statement, Income Statement
Document Summary
Disclosure: economic entity, periodicity, full disclosure, control, monetary unit, revenue recognition and, going concern realization, matching, historical cost, fair value. Recognition deals (cid:449)ith the a(cid:272)t of i(cid:374)(cid:272)ludi(cid:374)g so(cid:373)ethi(cid:374)g o(cid:374) the e(cid:374)tit(cid:455)"s (cid:271)ala(cid:374)(cid:272)e sheet / income statement. Elements of financial statements have historically been recognized when: they meet the definition of an element (ex. liability, they are probable, they are reliably measurable. Derecognition deals with the act of taking something off the balance sheet / income statement: economic entity assumption. This assumption allows us to identify an economic activity with a particular unit of accountability. This helps accountants determine what to include or recognize in a particular set of financial statements. Control is important in determining which entities to consolidate and include in the financial statements. There is power to dire(cid:272)t the e(cid:374)tit(cid:455)"s a(cid:272)ti(cid:448)ities. In order to include the entity in the consolidated financial statements, the reporting entity must be able to make strategic decisions for the entity.
