Chapter 5
Revenues
Revenue Recognition
Revenue Recognition
Five Steps to Revenue Recognition
Recognizing Revenue at a Single Point in Time
Illustration: Recognizing Revenue at a Single Point in Time
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Recognizing Revenue over a Period of Time
Illustration: Recognizing Revenue over a Period of Time
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Estimating Progress Toward Completion
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Summary of Fundamental Issues Related to Recognizing Revenue
Chapter 5 Part B: Special Issues
Special Issues for Step 1: Identify the Contract
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Special Issues for Step 3: Determine the Transaction Price
Special Issues for Step 3: Determine the Transaction Price
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Illustration: Changes in Estimated Variable Consideration
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Special Issues for Step 3: Determine the Transaction Price
Illustration: Constraint on Recognizing Variable Consideration
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Special Issues for Step 3: Determine the Transaction Price
Special Issues for Step 3: Determine the Transaction Price
Special Issues for Step 3: Determine the Transaction Price
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Special Issues for Step 3: Determine the Transaction Price
Special Issues for Step 3: Determine the Transaction Price
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Special Issues for Step 5: Licenses
Special Issues for Step 5: Franchises
Special Issues for Step 5: Bill-and-Hold Sales
Special Issues for Step 5: Consignment Arrangements
Special Issues for Step 5: Gift Cards
Presentation and Disclosure
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Chapter 5 Part C: Accounting for Long-Term Contracts
Illustration: Accounting for a Profitable Long-Term Contract
Journal Entries—Costs, Billings, and Cash Collections
Revenue Recognition — General Approach
Revenue Recognition Upon the Completion of the Contract
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Recognition of Revenue and Cost of Construction in Each Period
Illustration 5-24F: Balance Sheet Recognition
Long-Term Contract Losses
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Loss Projected on the Entire Project
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Activity Ratios
Asset Turnover Ratio
Receivables Turnover Ratio
Inventory Turnover Ratio
Profitability Ratios
Profit Margin on Sales
Return on Assets
Return on Shareholders’ Equity
Debt to Equity Ratio
Times Interest Earned Ratio
Financial Leverage
Equity Multiplier
Profitability Analysis
Profitability Analysis (Illustration 5-25)
GAAP in Effect Prior to ASU No. 2014-09
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The Realization Principle
Installment Sales
Installment Sales Method
Installment Sales Method
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Cost Recovery Method
Example: Cost Recovery Method
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Cost Recovery Method (Illustration continued)
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Franchise Sales
Franchise Sales
Illustration: Franchise Sales
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End of Chapter 5