MGAC02H3 Chapter 13: Chapter 13 Notes
Document Summary
Recognizes costs of both legal and constructive obligations, such as when an entity creates an expectation in others through its own actions that it will meet this obligation. Costs included as capital assets are only those related to the acquisition of the asset, not those related to the subsequent production of goods or services (product costs). Costs included as capital assets are retirement obligations resulting from both the acquisition of the asset and its subsequent use in producing inventory, such as the mining of coal. Product guarantees and customer programs y there are two major differences between the expense approach and the revenue approach: under the expense approach, the liability is measured at the estimated cost of meeting the obligation. Some amount of unearned revenue is recognized as a liability, and this is recognized as revenue in future periods when it is earned or the performance obligation is met.
