Crazy Computers
Crazy Computers Retailers is wrong in recognizing the insurance premium commission it receives after selling these policies to consumers as revenue. Provisions of ASC 605 – 45 on revenue recognition provides that an entity is a principal transaction and should be reported as gross on condition that the party recording is the primary obligator (Miller, 2013). This means that it is liable to the customer in case of a claim covered by the insurance policy accorded to the consumer. However, Crazy Computers Retailers does not offer primary obligation and thus should not recognize the initial commission collected from premium policies as gross revenue. The Third Party Insurer is the one responsible of settling the claim and thus should be responsible of recognizing the income as revenue.
The same scenario applies to the case of reinsurance. The ASC 605 – 45 is categorically clear that it does not cover transactions that include premiums for insurance and reinsurance (Miller, 2013). This means that the claim by Crazy Computers Retailers to recognize the commission revenue generated from sale of extended warranty contracts is flawed. Since this provision does not cover insurance related concepts, it would be thus erroneous to use this provision.
The reason given for not covering such revenue is that it is covered under a different codification. In this case, insurance is covered under Financial Services – Insurance (944-605) (FASB. 2011). Under this provision, Crazy Computers Retailers has the right to recognize any amount generated from the sale of an insurance policy to the extent that the insured is obligated to pay the insurer as prescribed in Financial Services – Insurance (944-685) Sec 25-2 (a) (FASB. 2011). Simil...
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...ccounts for $ 14/ cwt. Such an amount is able to cover the losses incurred by selling the hogs at $ 29 and thus the Three Little Pigs, Inc. should not recognize impairment in its inventory in interim period as provided for under ASC 270-10-45-6.
Works Cited
FASB Accounting Standards Codification. (2011). 944 Financial Services – Insurance. Retrieved May 27, 2014 from https://law.resource.org/pub/us/code/bean/fasb.html/fasb.944.2011.html
Financial Accounting Foundation. (2009). FASB Accounting Standards Codification: Notice to Constituents (v 1.05). Retrieved May 27, 2014 from http://asc.fasb.org/.../5724610.pd...
Miller, K. (2013). ASC 605-45 Sec: Determining whether a revenue transaction falls within the scope of ASC 605-45. The GAAP Post. Retrieved May 27, 2014 from https://thegaappost.com/sec/605-revenue/605-45-principal-agent-considerations/605-45-scope.html
ARB43, Ch.4, Par.9 ?Where evidence indicates that cost will be recovered with an approximately normal profit upon sale in the ordinary course of business, no loss should be recognized...?
Walker, Takem’s has the statutory law of contracts in his favor. In a contract, the seller and the purchaser have certain rights and obligations. Four basics must be met for a contract to be created (Chrisman, 2014). First, the offer has to be made. In the case at hand, the door-to-door salesperson made an offer of a computer to Ms. Walker. Second, the consideration has to be accepted. Ms. Walker accepted the offer to purchase a computer. The third step is capacity. The purchaser must be legally capable of entering into a contract; minors and the mentally incompetent are excluded in this case. Takem’s has given Ms. Walker the computer in exchange for her payments on her store account. Finally, the intention to enter into a contract has to be present. Ms. Walker signed a bill of sale, a security agreement, and a negotiable promissory note- which is an unconditional promise to pay a certain sum of money at a certain time in the future. Though Takem’s has the advantage to combat her claims, Tommy needs to ensure that his salespeople have not made any false statements or misrepresentations to Ms. Walker as this could have legal implications for the store and against the contract (Vaccaro, 1987). Ms. Walker is legally bound by the contract she agreed to in exchange for the computer; however if there has been any misrepresentations or false statements Ms. Walker may be able, with legal assistance, to call the contract into question
A Chinese toy manufacturer known as Fan Li approached Tegan to distribute its accessories for its Chinese made products in Europe in the May of 2007. According to the case, it was specified that Tegan’s traditional products had generally been £50 whereas Fan Li’s accessories were priced below £5. As their order’s size decreased, the growth of direct sales to consumers had increased their number of transactions. But it was a threat as Fan Li’s project provided a boost to the sales as tegan said agreed for Fan Li’s agreement. To get the appropriate outputs, Tegan’s account payables played a major role where tegan received discounts on most of its payables in prior payments as per the agreement.
We may become subject to product liability claims, which could harm our financial condition and liquidity if we are not able to successfully defend or insure against such
During the audit 213 sales transactions were examined to test revenue controls; 82 deviations were found and are as follows:
Cross, Frank B., and Roger LeRoy Miller. "Ch. 13: Strict Liability and Product Liability." The legal environment of business: text and cases, 8th edition. Mason, Ohio: Cengage Learning Custom Solutions, 2012. 294-297. Print.
Albrecht, W. S., Stice, J. D., Stice, E. K., & Skousen, k. F. (2002). Accounting Concepts and Applications. Cincinnati: South-Western.
The PCC was responsible for determining if the exemptions or alterations proposed to the GAAP was acceptable and meant the needs of private company financial statement consumers. In addition, the PCC was the principal advisory group to the FASB in regards to ensuring the proper treatment was given to private companies. Additionally, the PCC works to review all existing regulations under the GAAP to see what standards would require amendments or alterations. The PCC looks to create, consider, and vote on the proposed exemptions or alterations that are to be made. The PCC’s ultimate job is to find the GAAP regulations that can be changed to help improve private company financial
For the contrary the loading change (fee to cover the incurred administrative expenses) can be expensive. Also, the insurance sometime fails to meet demand providing limited protection, this insurance shortage can lead to ineffective insurance regulations. As well as, for consumer with minimum loss experience, their premium will be high, because their probability of loss is high.
AASB, Australian Accounting Standards Board, Statement of Accounting Concepts SAC4 ‘Definition and recognition of the elements of financial stat
The globalization of business has resulted in the need for compatible accounting standards that can be used internationally for financial reporting. As a result, the International Financial Reporting Standards (IFRS) were developed by the International Accounting Standards Board (IASB) to unify the various financial reporting methods and create a single accounting standard which can be applied to any financial statement worldwide (Byatt). The global standardization of financial reporting will increase the readability and enhance comparability of globally traded companies’ financial statements, without the need of conversion or translation. There are a few main differences between the International Financial Reporting Standards (IFRS) and the U.S. Generally Accepted Accounting Principles (U.S GAAP). The increasing recognition and acceptance of the International Financial Reporting Standards by accounting professionals in the United States, will affect the way in which the U.S will record financial statements in the future.
 At point of sale consumer are protected by law concerning some aspects of their purchases despite principal of caveat emptor
...harged for i.e. a warranty must come free of charge with the product. For example, the price of a car includes the manufacturer warranty that comes with it. Insurance products are heavily regulated and have dozens of federal and state regulations and much oversight. This is meant to ensure that such companies treat all insurance customers fairly and that they maintain enough reserves to pay for any potential claims. Although there are some insurance products sold at the F&I dealership (such as Mechanical Breakdown Insurance, GAP Insurance), for the most part they are 'contracts' between the customer and the service provider - in most cases, to reimburse the customer should something untoward happen to an asset of some kind that the customer is purchasing. In fact, the technical term most used for such products is 'Contractual Liability Insurance Program (CLIP)'.
"Accountants." WISCareers. University Of Wisconsin System Board of Regents, 2009. Web. 20 Nov. 2009. .
The revenue/cost period-: Revenue and the cost period in accounting that the company get income from normal business activities. It’s referred to normal business income that the company got by selling their product and service.