Question

describe them in your ouwn words.

as a long parragraph

Revenue Recognition Sales revenue is recognized at the time of product shipment or delivery, depending on when control passes, to unaffiliated customers, and when all of the following have occurred: a firm sales agreement is in place, pricing is fixed or determinable, and collection is reasonably assured. Sales are reported net of returns, consumer and trade promotions, rebates and freight allowed. Taxes imposed by governmental authorities on our revenue-producing activities with customers, such as sales taxes and value-added taxes, are excluded from net sales. Property and Depreciation Property, plant and equipment are stated at cost and are depreciated on the straight-line method. Buildings are depreciated over their estimated useful lives, primarily 40 years. Machinery and equipment are depreciated over their estimated useful lives, primarily ranging from 16 to 20 years. Purchases of computer software, including external costs and certain internal costs roll-related costs of employees) directly associated with developing significant computer software applications for internal use, are capitalized. Computer software costs are amortized on the straight-line method over the estimated useful life of the software, which generally does not exceed 5 years. Estimated useful lives are periodically reviewed and, when warranted, changes are made to them. Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that their carrying amount may not be recoverable. An impairment loss would be indicated when estimated undiscounted future cash flows from the use and eventual disposition of an asset group, which are identifiable and largely independent of the cash flows of other asset groups, are less than the carrying amount of the asset group. Measurement of an impairment loss would be based on the excess of the carrying amount of the asset group over its fair value. Fair value is measured using discounted cash flows or independent appraisals, as appropriate. When property is sold or retired, the cost of the property and the related accumulated depreciation are removed from the consolidated balance sheet and any gain or loss on the transaction is included in income.

Answer 1

Revenue Recognition

Revenue Recognition is part of the Order to Cash (O2C) Business Cycle. O2C business cycle begins with identifying the prospective customers by having a background check to ensure that they have the ability to make payments for the sales, entering into a firm agreement with them, negotiating and fixing the price, delivering the product shipment as per the terms of the customers and finally the collection. Revenue is recognized at the point where the title in the goods are passed on to the customer. So, based on the cycle mentioned above, Revenue recognition happens at the point where the products are shipped and delivered to the customer and customer acknowledges the receipt.

At the time of recording the Sales in the books, Sales shall be Net Sales i.e. the sale price reduced by the amount of any discounts, rebates, trade promotions, freight allowed and any returns from the customers. The taxes paid to the government authorities for producing such goods such as sales taxes or value added taxes shall also be reduced when calculating the net sales.

Property and Depreciation

Property, Plant and Equipment is another business cycle. Property, Plant and Equipment includes all kinds of tangible and Intangible assets. Property, plant and equipment is recorded in the books at Cost less Depreciation (in case of tangible assets) /Amortization (in case of intangible assets) on a straight line basis. Depreciation/Amortization on Straight -Line Basis means dividing the cost of the asset reduced by any salvage value by the expected useful life of the asset.

The assets and their expected useful life for the purpose of depreciation are stated as under:

1) Buildings (Tangible) : 40 Years

2) Machinery and equipment (Tangible) : 16-20 years

3) Computer Software (Intangible) : 5 years

When capitalizing the amount of computer software, along with the cost of the software, the internal and external costs such as payroll and payroll related employee costs that are directly associated with developing the software shall be also be capitalized.

Since, Useful Life is an estimated number, it shall be periodically reviewed and any changes to it if needed shall be made which shall be a change in the accounting estimate. Where the assets are long-lived, an impairment assessment shall be done whenever any events or changes in circumstances occur that indicate that the carrying amount may not be recoverable i.e. the recoverable amount of the asset is less than the carrying amount. The Recoverable Value shall be the estimated undiscounted future cash flows during the estimated period of use of the asset and the eventual estimated cash inflow on disposal of the asset. The impairment loss is measured as the difference of carrying amount of the asset and its fair value. Where the carrying amount is greater than the fair value, there shall be an impairment loss. Fair Value shall be determined by discounting the future cash flows.

When accounting for the sale or retirement of a property, the cost and its corresponding accumulated depreciation is removed from the balance sheet and any gain or loss on such property is recorded in the statement of profit or loss.