Flashcards Intermediate Accounting Exam 2

Performance obligation

promises to transfer goods and services to a customer, They are satisfied when the seller transfers control of goods or services to the customer.

Commercial substance

a characteristic of a transaction that causes a change in future cash flows.

Variable consideration

portion of a transaction price that depends on the outcome of future events

Principal

controls goods or services and is responsible for providing them to the customer

Agent

facilitates transfers of goods and services between sellers and customers

License - functional intellectual property

has significant stand-alone functionality, such that the intellectual property can perform a function or task, be played, or be aired over various types of media; the seller typically recognizes revenue at the point in time the customer can start using functional intellectual property

License - symbolic intellectual property

has usefulness to the customer that depends on the seller's ongoing activities, so it transfers a right of access; the seller recognizes revenue over the period of time the customer accesses the IP

Franchise

a contractual agreement under which the franchisor grants the franchisee the exclusive right to use the franchisor's trademark or tradename within a geographical area, usually for a specified period of time

Bill & hold

occurs when a customer purchases goods but requests that the seller retain physical possession of the goods until a later date

Internal control

a company's system to encourage adherence to company policies and procedures, promote operational efficiency, minimize errors and theft, and enhance the reliability and accuracy of accounting data.

Sarbanes-Oxley Act of 2002

established requirements for proper financial record keeping for public companies and penalties of as much as 25 years in prison for noncompliance

Pledged Accounts Receivable

a promise to relinquish control of an asset (or assets) in payment (or partial payment) of an amount due... Ex. accounts receivable used as collateral for a loan

Perpetual inventory system

a system of accounting for inventory by continuously adjusting the balance of the inventory account for each purchase, sale, or return of inventory; the cost of goods sold account is adjusted for each sale or return of inventory by customers.

Periodic inventory system

a system of accounting for inventory that involves an adjusting entry at the end of the period to update the balances of the inventory account and the cost of goods sold account for purchases, sales, and returns during the period.

Consignment goods

The goods that are given by one party, the consignor, to another party, the consignee, to sell; however, the consignee retains title until the goods are sold.

Obsolete goods

items that are no longer sellable due to their lack of relevance, demand, or functionality in the current market

LIFO liquidation

the decline in inventory quantity during the period.

LIFO pool

groups of inventory units based on physical similarities of the individual units