Accounting

Restatement A restatement occurs when a company revises and re-releases prior financial statements because they contained errors or violated accounting standards.

Restatement of Financial Statements The withdrawal and reissuance of previously published financial statements to correct errors, misstatements, or fraud.

Restricted Cash on the Balance Sheet What restricted cash means, where it appears on financial statements, and how debt covenants, escrow, and other limitations affect its classification.

Restructuring Liability A provision recorded when management commits to a formal restructuring plan, covering future severance, exit costs, and facility closures.

Retained earnings Retained earnings is the cumulative profit a company has earned but not paid to shareholders as dividends. It appears on the balance sheet as part of shareholders' equity.

Retained Earnings vs Net Income: What Is the Difference? Retained earnings is the cumulative profit a company has kept; net income is the single-period profit. Dividends and prior losses cause them to diverge.

Revaluation Surplus An equity reserve recording the upward revaluation of fixed assets above their historical cost, recognised under IFRS accounting standards.

Revenue recognition Revenue recognition is the accounting principle that determines when revenue appears on the income statement. The standard is based on when a company satisfies its performance obligations to customers.

Revenue Recognition Five-Step Model The five-step revenue recognition model under ASC 606 and IFRS 15 determines when and how much revenue to record based on performance obligations and contract terms.

Revenue Recognition for Customer Loyalty Programs Revenue recognition for customer loyalty programs defers a portion of the sale when points or rewards are earned, treating them as separate performance obligations settled later.

Revenue Recognition for Shipping and Handling Charges How companies treat post-delivery freight and handling fees: as separate performance obligations or as fulfillment costs.

Revenue Recognition for Subscription Contracts How subscription businesses recognize revenue ratably over the service period, handle upfront fees, and account for mid-period cancellations.

Revenue Recognition Policy How entities record income from contracts and performance obligations under accrual accounting rules.

Revenue Recognition Timing: Examples and Rules See how ASC 606 revenue recognition timing works across subscription services, long-term contracts, and consignment—with real examples.

Revenue Recognition When a Repurchase Agreement Exists How revenue recognition is affected by repurchase agreements: when a seller retains control, ASC 606 requires lease or financing treatment instead.

Reverse Acquisition Accounting Reverse acquisition accounting treatment occurs when the smaller legal entity is deemed the accounting acquirer, and financial statements are presented from its perspective.

Review Engagement An assurance engagement using analytical and inquiry procedures to provide limited assurance on financial statements, less rigorous than a full audit.

Right of Return Accounting for expected product returns as a constraint on revenue recognition and a refund liability at the point of sale.

Right-of-Use Asset The lessee-side asset representing the right to use an underlying asset over the lease term under modern accounting standards.

Right-of-Use Asset for Operating Leases How a right-of-use asset for an operating lease is measured, amortized, and reported on the balance sheet under modern accounting standards.

Right-of-Use Asset Impairment Right-of-use asset impairment occurs when a lease asset's carrying value exceeds its recoverable amount, requiring a write-down on the balance sheet.

Right-of-Use Asset vs Lease Liability: How They Differ on the Balance Sheet Right-of-use assets and lease liabilities start equal on adoption but diverge as interest accrues and payments are made. Learn what drives each.

Royalty Revenue Recognition Rules Understand royalty revenue recognition rules and how sales-based and usage-based royalties trigger under ASC 606.

Sale-Leaseback Transaction An agreement in which a company sells an asset and immediately leases it back, raising cash while retaining operational control—but facing strict rules that prevent accounting sleight of hand.

Segment reporting Segment reporting requires companies to disclose financial results for individual business segments, allowing investors to analyze performance and risks by division.

Segment Reporting Aggregation Criteria Segment reporting aggregation criteria define when two or more operating segments can be combined into one reportable segment based on economic similarity.

Segment Reporting Disclosure Detailed breakdown of revenue, profit, and assets by operating segment in financial statements.

Sell-Through Revenue Recognition Deferring revenue until an intermediary resells inventory to the final customer, rather than on shipment to the distributor.

Series Guidance in ASC 606: When Distinct Goods Form a Single Obligation When a series of distinct goods or services is treated as one performance obligation under ASC 606, and how it affects revenue recognition timing.

Series of Distinct Goods and Services in Revenue Recognition How recurring services qualify as a single performance obligation under the series guidance, simplifying revenue accounting.

Service Department Cost Allocation Methods Service department cost allocation methods—direct, step-down, and reciprocal—determine how to distribute internal service costs to revenue-generating departments.

Share-Based Compensation Accounting The methods by which companies measure and expense employee stock options, restricted stock, and other equity awards according to fair value standards.

Shareholders Equity Components Explained Shareholders equity components on the balance sheet include common stock, retained earnings, additional paid-in capital, treasury stock, and AOCI. Learn what drives changes in each line.

Short-Term Lease Exemption Under ASC 842: Rules and Practical Implications Learn the 12-month short-term lease exemption under ASC 842, when you can apply it, and what accounting relief you gain—and lose.

Significant Deficiency vs Material Weakness in Internal Controls Significant deficiency vs material weakness: learn the threshold differences and how each affects internal control reporting and audit conclusions.

Significant Financing Component in Revenue Contracts When contract payment terms embed an implicit loan, revenue must separate the financing element and recognize interest income as it accrues.

Software Development Cost Capitalization Three-stage model determining which development costs capitalize as intangible assets versus expensing as period costs.

Software Revenue Recognition for SaaS Companies Learn how software revenue recognition for SaaS companies works, including unbundling, distinct performance obligations, and ratable vs. upfront recognition.

SPAC Accounting Classifying trust shares as temporary equity and recognising warrants as liabilities in blank-check company financials.

Split Off Point Stage in joint production where commingled inputs diverge into separately identifiable products; critical for cost allocation decisions.

Spoilage Cost Allocation in Process Costing Normal spoilage is allocated to good units; abnormal spoilage is expensed separately. Understanding this distinction is critical for accurate product costing in manufacturing.

Stand-Alone Selling Price The price at which a company would separately sell a promised good or service; used to allocate revenue across multiple performance obligations.

Standalone Selling Price: How Transaction Price Is Allocated Standalone selling price allocation revenue recognition: method for dividing transaction price among multiple performance obligations when items lack market prices.

Standard Costing A costing method that pre-sets expected unit costs for direct materials, labour, and overhead, then compares actual costs against those standards to identify variances.

Statement of changes in equity The statement of changes in equity explains what happened to shareholders' equity during the period — profits earned, dividends paid, share buybacks, and other transactions.

Statement of Retained Earnings Financial statement reconciling the opening balance of accumulated earnings to the closing balance through net income, dividends, and other adjustments.

Step Acquisition Accounting Understand how acquirers revalue previously held equity interests to fair value when control is obtained in stages, and how remeasurement gains flow through the income statement.

Step-Down Method A sequential cost-allocation approach that reassigns service-department costs through other support departments before distributing to production.

Step-Down vs Reciprocal Method: Which Is More Accurate? How step-down and reciprocal methods differ in allocating support department costs, and when added complexity of reciprocal actually changes results.

Straight-line depreciation Straight-line depreciation allocates an asset's cost equally across each year of its useful life. It is the most common depreciation method.

Straight-Line Depreciation vs Accelerated Depreciation Compare straight-line and accelerated depreciation methods and their impact on early-year earnings and deferred tax assets.

Subscription Liability on the Balance Sheet How companies recognize subscription liability on the balance sheet as deferred revenue, splitting it between current and non-current liabilities based on when performance obligations are satisfied.

Subsequent Events Events or transactions occurring after the balance sheet date but disclosed before financial statements are issued, material to user decisions.

Substantive Procedures vs Tests of Controls in an Audit Substantive procedures test whether account balances are correct; tests of controls evaluate whether management's internal safeguards work. Auditors adjust the mix based on control risk.

Sum-of-Years-Digits Depreciation An accelerated depreciation method that front-loads deductions by applying a fraction of remaining useful life to the depreciable base.

Support Department Cost Allocation: A Step-by-Step Example Work through a numerical example of allocating IT, HR, and facilities costs to production departments using direct and step-down allocation methods.

Tax Benefit from Uncertain Tax Positions Framework for recognising tax benefits when the company's position is more-likely-than-not to survive audit.

Time-Driven Activity-Based Costing A streamlined method for assigning costs to products and services using time equations instead of labour-intensive transaction surveys.

Trading Securities vs Available-for-Sale Securities Compare accounting treatment of trading vs available-for-sale securities: how unrealized gains/losses flow through income statement and comprehensive income.

Treasury Stock Method Explained How the treasury stock method calculates dilution from in-the-money options and warrants in diluted EPS calculations.