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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