Company X is a software company that currently recognizes revenue when the agreement/contract is signed. Company X is considering a more conservative approach by recognizing revenue at the deliver of the product to customer. Therefore, it's considering changing its revenue recognition policy.
Days in receivable under current recognition policy (contract): 160
Days in receivable under new recognition policy (deliver): 120
If the firm's 1990 cost of sales to sales ratio and average tax rate are unaffected by a change to the more conservative revenue recognition method, what would be the affect of this accounting change on the company's 1990 net income?© BrainMass Inc. brainmass.com October 25, 2018, 1:29 am ad1c9bdddf
The sales in 1990 are $970,844.
Currently the revenue is accounted for on contract. Under the new policy the revenue would be accounted for on delivery.
Receivable days under current policy are 160 and receivable days under new policy would be 120. This implies that delivery happens after 40 ...
The solution explains how to estimate the impact on net income of an accounting change
Pension Accounting: Impact of changes on usefulness and understanding
SFAS 158 made revisions on how pension plans and postretirement benefit information should be reported in the financial statements.
Refer to Fatality Analysis Reporting System (FARS) to identify the changes that were made, both within the financial statements themselves and in the required disclosures.
Click http://www.fasb.org/pdf/fas158.pdf to learn how to access FARS.
Based on your analysis of the information provided, answer the following:
•What are the current requirements for reporting pension plan and postretirement benefit information in the financial statements?
•What are the changes that were made from previous reporting requirements?
•Have these changes improved reporting for the users of financial statements?
In your evaluation, you should consider how the changes either improved or did not improve the characteristics of usefulness and understandability identified in the conceptual framework for financial reporting, such as the following:
•Predictive or feedback value
•The definitions of financial statement elements