Accounting-Revenue Recognition

Revenue Recognition
Theory:
Most of you have probably have purchased merchandise via the Internet. You can buy products from many
companies online. Some of these companies, such as Amazon, often act merely as intermediaries between the
manufacturer and the consumer. Revenue recognition for this type of transaction has been controversial. If
Amazon sells something to a customer for $100 that costs $80, the profit on the transaction is clearly $20. But
should Amazon recognize $100 in revenue and $80 in cost of goods sold (the gross method), or should it
recognize only the $20 in gross profit (the net method)?
Research the implications of one reporting method versus the other. Why should it make a difference? What
factors might dictate whether or not Amazon should recognize the transaction gross versus net?
Discuss the primary differences between U.S. GAAP and IFRS with respect to revenue recognition?
Comprehension:
Access Amazon’s most recent financial statements using Edgar (www.sec.gov).
Review Amazon’s disclosure notes regarding gross versus net recognition and discuss the contents of the
note.
Review Starbucks 10-k, do they offer disclosure notes on this topic? Discuss the difference between Amazon
and Starbuck’s disclosure notes on this topic

Sample Solution

ACED ESSAYS