MidtermHints.doc

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Published on 6 Oct 2012
School
Ryerson University
Department
Accounting
Course
ACC 110
Professor
Sy Greenberg
ACC110 Oct 4, 2011
ACC110 – Key Notes (Midterm Hints)
Critical Event Approach
5 criteria for identifying the critical event (sale of goods) when all the
following are satisfied
Performance:
1. Significant Risks and Rewards transferred
2. Seller has no involvement or control over the goods
Collectability:
3. Collection of payment is reasonably assured
Measurability:
4. The amount of revenue can be reasonably measured
5. The costs of earning the revenue can be reasonably measured.
-Judgment is required in applying the guideline, based on this 1 overriding
criterion (check if it makes sense).
Common Points:
Delivery of Good(s)
Provision of Service(s)
Completion of product/construction/development
Cash collection
Important due to: not everyone is able to find the information in the
notes. Users also need to understand how revenue is recognized. The
preparers self interest can affect the choice.
Gradual Approach:
Two Options:
1: percentage-of-completion recognizing both revenue and
expenses to some level of performance/progress.
2: completed contract method. – Similar to critical event.
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Document Summary

5 criteria for identifying the critical event (sale of goods) when all the following are satisfied. Performance: significant risks and rewards transferred, seller has no involvement or control over the goods. Collectability: collection of payment is reasonably assured. Measurability: the amount of revenue can be reasonably measured, the costs of earning the revenue can be reasonably measured. Judgment is required in applying the guideline, based on this 1 overriding criterion (check if it makes sense). Important due to: not everyone is able to find the information in the notes. Users also need to understand how revenue is recognized. The preparers self interest can affect the choice. 1: percentage-of-completion recognizing both revenue and expenses to some level of performance/progress.

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