BU397 Lecture Notes - Lecture 12: Book Value, Operating Expense, Interest Expense
Document Summary
Warranty: promise made by a seller to correct problems experienced with the product, they will entail future post-sale costs, accounting of warranties depend on how the warranty is sold. Provided as part of the price expense approach. Revenue from warranty is recognized over life of warranty using straight- line method. At the time of the sale, the warranty is recorded as unearned warranty, as time goes by, warranty is recognized using the straight-line method. Loyalty programs: promising future benefit to the customer in exchange for current sales, standard setters now interpret programs where customer loyalty credits are awarded to be revenue arrangements with multiple deliverables, ifrs. Requires the revenue from the original transaction to be allocated between the award credits and the other components of the sale. The fair value of the award credits is recognized as unearned revenue. It is later recognized in revenue in revenue when the credits are exchanged for the promised awards: aspe.
