IFRS Accounting for Revenue Recognition and Long-Term Contracts
Revenue recognition is a crucial aspect of financial reporting, as it provides stakeholders with insights into a company’s financial performance. To ensure transparency and comparability, companies need to comply with globally recognized accounting standards, such as the International Financial Reporting Standards (IFRS) and Generally Accepted Accounting Principles (GAAP). In this blog post, we will discuss […]
The Role and Purpose of International Accounting Standards
International Accounting Standards (IAS) offer a standardized framework for the preparation and presentation of financial statements. The standards ensure that financial data is reliable, comparable, and accurate to enable investors, regulators, and stakeholders to make sound decisions. The main aim of International Accounting Standards is to unify cross-border financial reporting, decreasing inconsistencies due to differences […]
The Pros and Cons of Adopting IFRS
International Financial Reporting Standards (IFRS) is a set of accounting standards developed by the International Accounting Standards Board. IFRS has been adopted by more than 12,000 organisations in over 100 countries and is becoming the global standard for preparing financial statements of public companies throughout the world. However, GAAP (General Accepted Accounting Principles) is applied […]
Relevant Costs – Meaning and Pitfalls
Relevant costs are those expected future costs that vary under various alternatives. These are the costs that are affected due to decision-making. Non-recognition of relevant costs can also lead to wrong decisions. For example, in whether to retain or replace an old machine, the realisable value and dismantling cost of the old machine are relevant […]
What are the Flaws in Traditional Costing System
A traditional costing system is an accounting approach used to assess the cost of producing products in order to generate a profit. The traditional allocation method assigns manufacturing overhead expenses based on a single cost driver, such as direct labour hours or machine hours. While nonmanufacturing costs are not regarded as production costs and are […]
Target Costing and Lifecycle Costing Explained
Target Costing and Lifecycle Costing are two important tools that can be used to manage and control costs throughout the product development process. Target costing is a tool that can be used to set a target cost for a product or project. This target cost is then used as a cost management and control baseline. […]
Method of Absorbing Overhead to Various Products or Jobs
Overhead Absorption A method of overhead absorption in cost accounting is a method of allocating expenses and gains to cost centres within a business. Benefits of Overhead Absorption Overhead absorption is useful for accounting purposes because it allows managers to assign a dollar value to the cost of services or products provided by each department […]
What are the Objectives of Target Costing?
Target Costing is a strategic pricing technique used by businesses in which the desired selling price of a product is set, and then the costs associated with making that product are reduced to meet that target selling price. Target costing is based on the idea that, as opposed to the conventional method of setting prices […]
Differences Between Traditional Costing and Target Costing
Many companies have difficulty understanding how traditional costing and target costing differ. These terms have their own specific meanings and purposes. Traditional costing and target costing have some differences. This is so because traditional costing is a methodology that aims to collect information about the cost and use that information to estimate the cost of […]
Meaning and definition of target costing
The strategic cost management tool “target costing” incorporates customer-centric pricing principles instead of traditional firm-oriented pricing. A target cost is a basis for establishing and controlling individual costs. The objective of target costs is to provide incentives to lower costs and increase the quantity of output in the same unit of time. CIMA defines target […]