1. Basis and principles of revenue recognition

1.1 Basis of revenue recognition—accrual basis

After the formation of modern enterprises, due to the differences between ownership and management rights With the separation of fiduciary responsibilities, owners and operators have become the most concerned issue, which has gradually become the goal of financial accounting. The accrual system is derived from such an economic environment.

From the perspective of double-entry bookkeeping, when an income is recognized, an increase in an asset or a decrease in a liability will be recognized; when an expense is recognized, a decrease or decrease in an asset will also be recognized. An increase in a liability. Accrual accounting involves the recognition of virtually all accounting elements. But revenue is the most complex element of accounting, and the recognition of revenue, especially when to recognize it, may be one of the most complex issues in financial accounting. The recognition of income means that the right to collect income has occurred, and the recognition of related expenses means that the responsibility to pay expenses has been determined. Therefore, the accrual basis is mainly for the recognition of income and expenses.

1.2 Principles of revenue recognition—substance over form

In the "Accounting Standards for Business Enterprises - Revenue" (hereinafter referred to as the "Revenue Standards"), it stipulates that the sales and provision of goods The recognition and measurement of income from three major types of transactions or matters, including labor services and use of the company's assets by others, also takes into account the special characteristics of transactions and matters such as construction contracts, non-monetary transactions, leasing, insurance contracts of insurance companies, futures, investments, and debt restructuring. nature, and their recognition principles are separately stipulated in their respective specific standards. Judging from the content of each confirmation, compared with the past, it reflects the principle of substance over form, that is, the condition for revenue recognition is not the delivery of ownership certificates or physical objects, but the transfer of the main risks and rewards of commodity ownership and other substantial matters. condition.

1.3 How to recognize income

In the "Income Standards", the definition of income is "generated from daily activities such as selling goods, providing services and using the company's assets by others. The total inflow of economic benefits, which does not include payments collected on behalf of third parties or customers." From this definition, it can be broken down into three important characteristics of income. First, it is the economic benefit formed by daily activities; second, this benefit inflow is generated by the enterprise selling goods, providing labor services and allowing others to use the assets of the enterprise. Obtained; thirdly, the inflow of economic benefits does not include the money collected on behalf of the company. In this way, accountants can recognize revenue from these three characteristics.

The recognition of revenue requires the professional judgment of accountants. For every transaction or event related to income, it is necessary to identify whether the items corresponding to the income should be formally recorded in accounting, when they should be recorded and included in the statement, and whether the items recorded or included in the statement meet the requirements. Four basic criteria (definability, measurability, relevance and reliability)? It should also be considered: whether the income and related costs and expenses are proportional to each other, whether the benefits are greater than the costs, whether the income items that should be recorded and included in the statements comply with the principle of importance, etc.