Generally accepted accounting principles, or GAAP, are a set of rules that encompass the details, complexities, and legalities of business and corporate accounting. GAAP-compliant accountants strictly adhere to established rules and regulations. Consistent standards are applied throughout the financial reporting process. GAAP-compliant accountants are committed to accuracy and impartiality.
Staff Accounting Bulletin No. Securities and Exchange Commission Action: Publication of Staff Accounting Bulletin Summary: This staff accounting bulletin summarizes certain of the staff's views in applying generally accepted accounting principles to revenue recognition in financial statements.
The staff is providing this guidance due, in part, to the large number of revenue recognition issues that registrants encounter. For example, a March report entitled Fraudulent Financial Reporting: Public Companies, sponsored by the Committee of Sponsoring Organizations COSO of the Treadway Commission, indicated that over half of financial reporting frauds in the study involved overstating revenue.
December 3, For Further Information Contact: The statements in the staff accounting bulletins are not rules or interpretations of the Commission, nor are they published as bearing the Commission's official approval.
They represent interpretations and practices followed by the Division of Corporation Finance and the Office of the Chief Accountant in administering the disclosure requirements of the Federal securities laws.
Topic A provides the staff's views in applying generally accepted accounting principles to selected revenue recognition issues. Selected Revenue Recognition Issues 1. Revenue Recognition - General The accounting literature on revenue recognition includes both broad conceptual discussions as well as certain industry-specific guidance.
However, in the absence of authoritative literature addressing a specific arrangement or a specific industry, the staff will consider the existing authoritative accounting standards as well as the broad revenue recognition criteria specified in the FASB's conceptual framework that contain basic guidelines for revenue recognition.
Based on these guidelines, revenue should not be recognized until it is realized or realizable and earned. Paragraph 84 a continues "the two conditions being realized or realizable and being earned are usually met by the time product or merchandise is delivered or services are rendered to customers, and revenues from manufacturing and selling activities and gains and losses from sales of other assets are commonly recognized at time of sale usually meaning delivery " [footnote reference omitted].
In addition, paragraph 84 d states that "If services are rendered or rights to use assets extend continuously over time for example, interest or rentreliable measures based on contractual prices established in advance are commonly available, and revenues may be recognized as earned as time passes.
Persuasive evidence of an arrangement exists, 3 Delivery has occurred or services have been rendered, 4 The seller's price to the buyer is fixed or determinable, 5 and Collectibility is reasonably assured.
Persuasive Evidence of an Arrangement Question 1 Facts: Company A has product available to ship to customers prior to the end of its current fiscal quarter. Customer Beta places an order for the product, and Company A delivers the product prior to the end of its current fiscal quarter.
Company A's normal and customary business practice for this class of customer is to enter into a written sales agreement that requires the signatures of the authorized representatives of the Company and its customer to be binding.
Company A prepares a written sales agreement, and its authorized representative signs the agreement before the end of the quarter. However, Customer Beta does not sign the agreement because Customer Beta is awaiting the requisite approval by its legal department. Customer Beta's purchasing department has orally agreed to the sale and stated that it is highly likely that the contract will be approved the first week of Company A's next fiscal quarter.
May Company A recognize the revenue in the current fiscal quarter for the sale of the product to Customer Beta when 1 the product is delivered by the end of its current fiscal quarter and 2 the final written sales agreement is executed by Customer Beta's authorized representative within a few days after the end of the current fiscal quarter?Financial accounting is a specialized branch of accounting that keeps track of a company's financial transactions.
Using standardized guidelines, the transactions are recorded, summarized, and presented in a financial report or financial statement such as an income statement or a balance sheet. 1 Summary Why Is the FASB Issuing This Accounting Standards Update (Update)? Current generally accepted accounting principles (GAAP) offer limited guidance.
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Definition of accounting: The systematic recording, reporting, and analysis of financial transactions of a business. The person in charge of accounting. Accounting or accountancy is the measurement, processing, and communication of financial information about economic entities such as businesses and leslutinsduphoenix.com modern field was established by the Italian mathematician Luca Pacioli in Accounting, which has been called the "language of business", measures the results of an organization's economic activities and conveys this.