See the Topic resource article, “Revenue Recognition Guidance & the Potential For Fraud and Abuse,” which is available in the Topic resources. In addition, refer to the Starbucks Financial Data – SEC Filings, Form 10-K for the most recent fiscal year and locate the note on revenue recognition in the notes to the financial statements. You will need to write a 500-750-word document that addresses these items.
Take the following five steps to recognize revenue as described in Chapter 4.
Refer to Starbucks Form 10-K for examples on how Starbucks uses the 5-step revenue recognition process.
See the article Revenue Recognition Guidance and Fraud and Abuse. We will discuss the five-step revenue recognition process and how it may help to prevent Starbucks financial fraud. Give examples to back up your claims. You will see in the article subheadings “Frauds and Abuses” as well as “Implications Of New Guidance”; these could be helpful for the assignment.
Name the Microsoft Word document “LastnameFirstinitial.ACC502.T2.”
ACC 502 Week 2
The five-step revenue recognition standard is summarized in this summary
Accounting’s concept of revenue recognition outlines the method and timeframe for recording income. The accrual method of accounting adheres to the concept of revenue recognition, which necessitates that revenues be recorded when recognized and earned–not when cash is delivered (Tuovila, 2021). Recognizing revenue usually involves five components.
It is important to establish a contract with your client. A formal agreement is required to describe a contract. It must include the parties’ rights, obligations and payment terms. Next is to determine the terms and conditions of the contract. The second stage is where franchisors will be responsible for establishing and outlining pre-opening operations. This includes location development, training, and other related tasks. Third, revenue recognition involves determining the transaction price. This requires the accounting of all revenue sources. The final stage in revenue recognition should include an examination of collections, which includes original franchise fees as well as royalties, renewal costs and transfer fees. Allocating prices to performance promises is the fourth step in recognising revenue. This phase is where franchisors designate the transaction price that franchisees must pay at the start of an agreement. A modified market evaluation method, the projected cost plus margin, or the residual approach may determine the transaction price (Shoemaker 2018, 2018). This is the final and most important step in recognising revenue. At this point, the income is acknowledged and the franchisor is given the responsibility to provide the service .
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