Professional Documents
Culture Documents
GD - or MPW 84679 1 300 GD - OR..edited - 1
GD - or MPW 84679 1 300 GD - OR..edited - 1
Week 3 Discussion
Name
Institution
Date
WEEK 3 DISCUSSION 2
Explain how MoviePlus would account for its revenue if it did follow GAAP. Should
MoviePlus would be able to account for its revenue if it follows the Generally Accepted
Accounting Principle. To achieve this, MoviePlus has to apply the revenue recognition principle.
This principle is a combination of the matching principle and accrual accounting, which
stipulates that revenue is only acknowledged when they are earned or realized, and not
essentially when received. By realizable, we mean that the services or goods have been received,
but the payments for the goods and services is expected at a later date. Therefore, MoviePlus
must be able to identify earned revenue, and this is because earned income accounts for services
and goods that have been performed and provided respectively. Also, MoviePlus must ensure
that the revenue generating activities have been primarily or fully completed before they include
it as revenue during that accounting period (Schipper et al., 2009). Also, there must be a realistic
level of confidence that the expected revenue will be received. Finally, through the use of
matching Principle, MoviePlus must ensure that all revenues and their associated costs must be
reported in that accounting period. Yes, this is an ethical issue because specific rules and
regulations of a business must be followed. Thus, by adhering to the GAAP, the business shows
Explain the meaning and importance of economic substance and how it relates to the
financial statements.
Economic substance is a transaction that has a drive other than the decrease of tax
obligation. This theory is used in the checkup of tax protections to see if they are taking
advantage of the tax laws. Economic substance is important because the corporate structure of an
WEEK 3 DISCUSSION 3
organization must have real substance, ans should not be Conduit Company or empty shell.
Hence, without economic substance tax authorities would ignore the company’s optimized tax
structure and the organization would lose benefits provided by contracts for the evasion of
double taxation (Mathur & Singh, 2017). Economic substance is related to financial statements
in that it ensures that the financial statements offer an accurate, relevant, and complete image of
Reference
Schipper, K. A., Schrand, C. M., Shevlin, T., & Wilks, T. J. (2009). Reconsidering
Mathur, A., & Singh, K. (2017). Economic substance requirements and multinational