ASR Autumn 2012 - Topic 02 - 1pp.pdfVIP

122420 Accounting Standards + Regulation Topic 2: Revenue Topic 2 - Revenue 1 2Topic Overview 1) Framework Definitions of Income/Expenses 2) What information is in profit? 3) Why profit is manipulated 4) The role of regulation 5) Regulation: 1) Policy selection 2) Revenue 3) Construction Contracts Topic 2 - Revenue 2 3Topic 2 - Revenue 3 4Definition of Income ? Income is increases in economic benefits during the accounting period in the form of inflows or enhancements of assets or decreases in liabilities that result in increases in equity, other than those relating to contributions from equity participants. ? AASB Framework, para 70 ? Does not distinguish between revenues/gains Topic 2 - Revenue 4 5Definition of Income ? Revenue Definition: ? “Revenue arises in the course of the ordinary activities of an entity...” ? AASB Framework, para 74 ? Gain Definition: ? “Gains represent other items that meet the definition of income and, or may not, arise in the course of the ordinary activities of an entity.” ? AASB Framework, para 75 Topic 2 - Revenue 5 6Definition of Expenses ? Expenses are decreases in economic benefits during the accounting period in the form of outflows or depletions of assets or incurrences in liabilities that result in decreases in equity, other than those relating to distributions from equity participants. ? AASB Framework, para 70 ? Does not distinguish between expenses/losses Topic 2 - Revenue 6 7Definition of Expenses ? Expenses Definition ? “The definition of expenses encompasses losses as well as those expenses that arise in the course of the ordinary activities of the entity.” AASB Framework para 78? , ? Loss Definition ? “Losses represent other items that meet the definition of expenses and may, or may not, arise in the course of the ordinary activities of the entity.” ? AASB Framework, para 79 Topic 2 - Revenue 7 8Information Content of Profit P fit R E? ro = evenues – xpenses ? Yes ? Media attention on bottom line pro