ACTG 2010 Chapter Notes - Chapter 4: January 30, Income Statement, Website Wireframe
22 Mar 2016
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Document Summary
Chapter 4: income measurement and the objectives of financial reporting! The term recognition refers to revenues and expenses appearing on the income statement. There are different methods in recognizing revenues and expenses and depending on which one is chosen, amounts in nancial statements will vary. Furthermore, accounting and nancial ratios will vary, presenting different information to stakeholders. Accountants have devised two approaches for recognizing revenue (for different types of transactions): : critical event approach - recognizes revenues when the critical event occurs. Before the critical event, there is no revenue recognized but after the critical event, 100% of the revenue is recognized! Example - services provided over a period, construction contracts, or interest earned, etc. The ifrs provides 5 criteria for identifying the critical event. Performance criteria - the buyer has done all of what they"re supposed to do to be entitled to payment!
