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Wiley GAAP 2013: Interpretation and Application of Generally Accepted Accounting Principles by Joanne M. Flood

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CHAPTER 12

REVENUE RECOGNITION—EVOLVING PRINCIPLES AND SPECIALIZED APPLICATIONS

REVENUE RECOGNITION — GENERAL PRINCIPLES

Revenue recognition concerns

Revenue recognition—general guidelines

Evolving Problems in Revenue Recognition

Financial statement presentation: gross versus net

Reporting taxes collected as revenue

Barter transactions

Channel stuffing

Mischaracterization of extraordinary or unusual transactions as components of gross revenue

Mischaracterizing transactions as involving “arm’s-length” third parties, thus justifying unwarranted gain recognition

Selling undervalued assets to generate reportable gains

Deliberate misstatement of percentage of completion on long-term construction contracts

Disclosures

Specialized Applications

LONG-TERM CONSTRUCTION CONTRACTS

Perspective and Issues

Definitions of Terms

Concepts, Rules, and Examples

Methods of Accounting

The percentage-of-completion method

The completed-contract method

Preferability assessment

Costs Incurred

Precontract costs

Contract costs

Estimated costs to complete

Subcontractor costs

Back charges

Types of Contracts

Revenue Measurement

Contract Losses

Combining and Segmenting Contracts

Joint Ventures and Shared Contracts

Accounting for Change Orders

Accounting for Contract Options

Accounting for Claims

Accounting Changes

SERVICE REVENUES

Perspective and Issues

Definitions of Terms

Concepts, Rules, and Examples

Service versus Product Transactions

Revenue Recognition Methods

Expense Recognition

Accounting treatment

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