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Financial Accounting Income Statement: Apple and Philips.

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There are two main parts to this case. Please make sure this paper is well organized and covers all of the items below.

Part I.
Why is revenue recognition a significant issue? How do we determine when revenues are recorded for accounting purposes?
Explain the difference between a product and period expense.
Discuss the matching concept as it relates to accounting for revenues and inventory.

Part II.
Refer to the latest annual financial statements for the two following companies: Apple: http://investor.apple.com/ and Philips: http://www.philips.com/about/investor/index.html. Generally, this information is found in the Investor Relations area of the website.

Clearly identify the companies, the time period, and include the link to the financial statements you are analyzing in your report.

What accounting conventions do the two companies follow, US GAAP or IFRS?
What about auditing standards for the two companies?
Locate the income statement for the past two years for both companies. Prepare a table comparing five items or more from each statement.
Comment on the changes from one year to another. Is the company doing better or worse? Did revenues and expenses increase or decrease?
Is it easy to discern trends or compare the information from year to year and between the two companies? Please, comments on both aspects and show some examples.
Modular Case Expectations

It is important to answer the questions as posed. The discussion should be three to five pages and written in a clear and concise manner. Support your discussion with references in APA format. You are encouraged to use Excel or other compatible spreadsheet when computations are involved.

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Solution Preview

Why is revenue recognition a significant issue? How do we determine when revenues are recorded for accounting purposes?

Revenue is typically the largest single line item in the income statement and is a key determinant of profits. Revenue is recorded when the services are rendered or product delivered and the payment is received or likely to be received ("realizable") and no significant contingencies or future services are pending.

Explain the difference between a product and period expense.

A product expense is one related to making inventory. It is capitalized as an asset until sold. A period expense is one that is used up or has no further benefit and so must be written off in the current period. Inventory becomes a period expense when it is sold to the customer and is reported as cost of goods sold.

Discuss the matching concept as it relates to accounting for revenues and inventory.

Matching concept means that ...

Solution Summary

Your tutorial is 678 words, including a table of nine differences between Apple and Philips based on review of the 2010 and 2011 income statements. Snapshots of both income statements are in Excel for you.

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