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Financial Accounting: In an Economic Context by Jamie Pratt

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KEY TERMS

Note: Definitions for these terms are provided in the glossary at the end of the text.

Conservatism (p. 95)

Consistency (p. 92)

Economic entity assumption (p. 79)

Face value (p. 87)

Fair market value (FMV) (p. 84)

Fiscal period assumption (p. 80)

Fiscal years (p. 81)

Going concern assumption (p. 81)

Historical costs (p. 87)

Input market (p. 84)

Lower-of-cost-or-market rule (p. 87)

Matching (p. 90)

Materiality (p. 93)

Net realizable value (p. 87)

Objectivity (p. 88)

Original cost (p. 84)

Output market (p. 84)

Present value (p. 84)

Purchasing power (p. 82)

Replacement cost (p. 84)

Revenue recognition (p. 90)

Stable dollar assumption (p. 82)

Valuation bases (p. 84)

ETHICS in the Real World

Microsoft Corporation changed its accounting for the sale of operating systems when it released Vista in 2007. The company now recognizes all revenue when a copy of Vista is sold; in previous years the company withheld a portion of revenue to be recognized in future periods when software updates were made available to customers. Historically, Microsoft lobbied the FASB and SEC to support strict guidelines for revenue recognition for software companies, but the company now has adopted some of the aggressive policies it had previously decried.

ETHICAL ISSUE Is Microsoft acting ethically when it changes its position on an important financial accounting principle? Discuss the implication of market forces on Microsoft's decisions.

INTERNET RESEARCH EXERCISE

Find the most recent Form 10-K ...

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