RSM220H1 Chapter Notes - Chapter 6: Credit Risk, Measurement Uncertainty, Time Control
Document Summary
Understanding the nature of sales transactions from a business perspective. Process of capturing info for financial purposes involves deciding when to recognize the transaction and how to measure and present it; must therefore understand the business the entity is engaged in (in order to account for transactions properly) Important to focus on whether goods or services or both are being transferred (referred to as deliverables) Many contracts involve both goods and services (known as multiple deliverable or bundled sales) Understanding what the company is selling will help determine when to recognize revenues. Most business transactions are reciprocal; the entity gives smth up and receives smth in return. Consideration is what the entity receives in return for the provision of goods or services. We assume transactions are at arms length (value of what is given up usually approximates the value of what is received in the transaction) and reciprocal. The risk that the price of an asset will change: price risk.
