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Revenue Recognition Policy: Metropolitan - Case Study Example

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In this manner there is no physical product leaving the premise in order for revenue to be earned. Throughout the examination some of the major areas of revenue income recorded by the Metropolitan in their books of accounts include the following; Disposal non-hazardous and hazardous waste materials, the cost of transporting of the waste materials from the customer premises to where the waste are going to be disposed off, there are also cost of materials purchased to assist the job being done, labor cost is also reflected in the revenue income, allowances expenses of the employees like travelling expenses and lastly there are tax expenses which has to be paid in time. In order to analyses each and every scenario is in order to know at what point does the ownership of the waste material passes from the customer to Metropolitan and when is the contract is valid. In the first scenario, when the customer is transporting the materials to the disposal site, then the contract has not been performed substantially and the Metropolitan should not record any revenue since the contract is not fully done, the revenue should be recorded on 20th after the successful destruction of that waste. According to the accounting standards a service can be rendered as a single act or as continuous process over a period of time, charges of the same services can also be spread over the period through which the work is done. Where the contract is made the revenue is recognized when there is a substantial work performance which in our case has not been done they should record it using periodicity concept where revenue of any particular time is recorded at that time when they are realized. In the second scenario the contract is done in part and the Metropolitan is free to record the revenue as per the completion method of revenue recognition where one realized revenue over period of time. The part of collection and transportation has been done so the company can realized that part but should not recognize the whole revenue since the contract of destruction part has not been done and the whole revenue will be realized after the whole project is done. ASC 605-15-25-1: Being realized or realizable…states that revenue and gains are realized when products (goods or services), merchandise, or other assets are exchanged for cash or claims to cash.... Being earned…states that revenue is not recognized until earned.  That paragraph states that an entity's revenue-earning activities involve delivering or producing goods, rendering services, or other activities that constitute its ongoing major or central operations, and revenues are considered to have been earned when the entity has substantially accomplished what it must do to be entitled to the benefits represented by the revenues… ASC 605-20-25-4, costs that are directly related to the acquisition of a contract and that would have not been incurred but for the acquisition of that contract (incremental direct acquisition costs) shall be deferred and charged to expense in proportion to the revenue recognized. All other costs, such as costs of services performed under the contract, general and administrative expenses, advertising expenses, and costs associated with the negotiation of a contract that is not consummated, shall be charged to expense as incurred. .605-20-S25-1 See paragraph 605-20-S99-2, SEC Observer Comment: Revenue and Expense Recognition for Freight and Services in Process, for SEC Staff views on recognition of revenue and expenses by freight service entities In my examination of the company product and in accordance with the international accounting standards, revenues should be recognized in the financial ...Show more
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The main aim of this memo is to show the result of the expenses and revenue recognition for Metropolitan environment service. …
Revenue Recognition Policy: Metropolitan
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