SMG AC 221 Lecture Notes - Lecture 6: Delta Air Lines, Deferred Income, Gift Card
30 Sep 2016
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Multistep income statement net revenue & cogs. When it is earned (about what the company has to do for customers) and realizable (about what customers have to do for company, reasonably assured) Example of realizable revenue: getting an education, we pay tuition up front, but we receive the value in classes landlord receiving prepaid rent up front, realizes value by letting tenant live there. Revenue is recognized when a company: provides the service (ie you get off your delta airlines flight to atlanta) 2) transfers the risk & reward of a good to the customer (ie you buy a camera, you are now responsible if it breaks) Identify obligations c determine transaction price (ie total on receipt) d allocate price to separate obligations (ie each line on the receipt) e recognize the revenue as obligations are met. *automatically assumes that company will immediately retain revenue, nothing about customers being realizable. Realizable but not earned = unearned or deferred revenue.
