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Balance sheet Essay

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Securities and Exchange Commission issued a series of accounting rules that resulted in the edification of extremely complex and sometimes contradictory requirements. Concepts such as “persuasive evidence of an arrangement,” and “multiple deliverables” entered the accounting lexicon. Canadian accounting then adopted the U. S. Rules, with sometimes bizarre results. For example, a small start-up company could be in the position that it has sold product and services, received the cash, and has no further obligation to its customer, but cannot record revenue from the sale.

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Over the past two years, old Canadian generally accepted counting practices (GAP) for most organizations have been changed to either International Financial Reporting Standards (FIRS, primarily for public companies) or Accounting Standards for Private Enterprises (ASPS, primarily for private companies). The conversion of Canadian GAP to FIRS and ASPS has simplified the previously overly complex rules related to revenue recognition, and restored elements of common sense to the measurement of revenue. Our start-up company referred to above would now be able to record a sale in its accounts.

However, some large accounting firms have attempted to eliminate choices and so have prescribed rules for their clients that go beyond the written FIRS or ASPS requirements. In complex situations you should discuss revenue recognition with a qualified accountant, and if necessary seek a second opinion. Note that, in general, FIRS and ASPS requirements are similar, and often they are identical. Revenue from the sale of goods is recognized when the vendor has transferred the significant risks and rewards of ownership to the buyer and it no longer retains control or managerial involvement in the goods.

Revenue from contracts for service and from long-term construction contracts is recognized using the percentage-of-completion method. Revenue is measured at the fair value of consideration received or receivable. When the buyer has a right of return and there is uncertainty about the possibility of return, revenue is not recognized until the goods have been accepted formally by the buyer or the goods have been delivered and the time period for rejection has elapsed, unless a reliable estimate of the expected returns can be made and a provision for returns is recognized.

Goodwill Existing standards require the costs of internally generated intangible assets to be expensed during the research phase and capitalized during the development phase. The standards provide criteria for determining which phase a project is in, but applying these criteria is not always a simple task. ASPS permits a private enterprise to choose to capitalize development expenditures or to expense them. The same choice must be applied to all internally generated intangible assets.

There is a single impairment model for all financial assets that compares the corded amount of the instrument to the higher of the amounts recoverable by holding the asset, selling it or realizing any security. Impairment losses for a financial asset in one period must be reversed if its recoverable amount increases in a subsequent period. Inventories An entity may elect to measure an item of property, plant and equipment at the date of transition to accounting standards for private enterprises at its fair value and use that fair value as its deemed cost at that date.

A first-time adopter may have established a deemed cost previously for some or all of its assets and abilities by measuring them at their fair value at a particular date (for example, comprehensive revaluation). It may use such fair value measurements as deemed cost for accounting standards for private enterprises at the date of that measurement. If the entity did not have a comprehensive revaluation, then it can use the fair value at the date of transition to ASPS (i. E. At date of opening balance sheet) as the deemed cost of its asset. This election can be made on an item-by-item basis.

Cite this Balance sheet Essay

Balance sheet Essay. (2018, May 19). Retrieved from https://graduateway.com/balance-sheet/

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