RSM220H1 Chapter 6: Chapter 6.docx
Document Summary
Sales agreements specify what is being acquired & given up: acquired: consideration or rights to consideration; amount, nature & timing of what customer agrees to pay are normally agreed upon, given up: goods/services; details regarding delivery, timing, quantities, shipping terms agreed on, barter/nonmonetary transactions: where few/no monetary assets are received as consideration when goods or services are sold, barter transactions seen as sale if transaction has commercial substance, commercial substance: if transaction is a legit purchase and sale and entity has entered into transaction for business purpose; entity will be in different position and its future cash flows are expected to change significantly b/c of transaction. This occurs when: inability to reasonably estimate consideration (i. e. barters, inability to reasonably estimate related costs (i. e. warranty, or costs to complete contract, inability to measure the outcome of the transaction itself, concessionary terms make it difficult to measure transaction, as they often involve long time horizons or unique and more lenient return policies.
