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GD - or MPW 84679 1 300 GD - OR..edited - 1
GD - or MPW 84679 1 300 GD - OR..edited - 1
GD - or MPW 84679 1 300 GD - OR..edited - 1
Week 3 Discussion
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Institution
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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 recognized when they are realized and earned, and not necessarily
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 standards of
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 reduction of tax
liability. This concept is used in the checkup of tax shelters to see if they are abusing the tax
laws. Economic substance is important because the corporate structure of an organization must
WEEK 3 DISCUSSION 3
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 events and
transactions.
WEEK 3 DISCUSSION 4
Reference
Schipper, K. A., Schrand, C. M., Shevlin, T., & Wilks, T. J. (2009). Reconsidering
Mathur, A., & Singh, K. (2017). Economic substance requirements and multinational