Scribd
Upload
54 views

Cadenhead Presented An Approach To Uniformity Referred To As Circumstantial

Cadenhead presented an approach to uniformity referred to as circumstantial variables. Circumstantial variables are environmental conditions beyond a firm's control that are applicable to their industry. These variables can lead to problems with cost or verifiability of accounting methods. For example, the existence of a market affects inventory valuation methods. Firms may use flexibility due to circumstantial variables.

Uploaded by

Taimour Hassan
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
54 views

Cadenhead Presented An Approach To Uniformity Referred To As Circumstantial

Cadenhead presented an approach to uniformity referred to as circumstantial variables. Circumstantial variables are environmental conditions beyond a firm's control that are applicable to their industry. These variables can lead to problems with cost or verifiability of accounting methods. For example, the existence of a market affects inventory valuation methods. Firms may use flexibility due to circumstantial variables.

Uploaded by

Taimour Hassan
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
You are on page 1/ 1

Cadenhead presented an approach to uniformity referred

to as circumstantial #4099
Cadenhead presented an approach to uniformity referred to as circumstantial variables.
Circumstantial variables are environmental conditions (conditions beyond the control of the
individual firm that are applicable to the particular industry that the firm is in). Circumstantial
variables lead to problems relative to either (1) costliness of the prescribed method in the
particular event situation or (2) a low degree of verifiability because estimates vary widely
relative to the prescribed method. For example, Cadenhead notes that the existence of a ready
market with regularly quoted prices would facilitate inventory valuation if realizable value were
not used relative to inventories, but the absence of such a market would allow a firm to use
another type of inventory/cost of goods sold measurement. In the four situations discussed
here, classify each situation according to whether it involves finite uniformity, rigid uniformity,
flexibility, or circumstantial variables. Research and development costs: SFAS No. 2 requires
that all research and development costs (some of which will have future cash flow benefits and
others will not) be written off to expense as incurred. Are there any other accounting principles
that are present here? Discuss. Unusual right of return by customers: SFAS No. 48 covers
those industries (of which there are not many) where buyers have an unusual right of return due
to industry practices that cannot be avoided by the individual firm. The “unusual right of return”
arises where buyers have an unusually long time period during which purchase returns can be
made. From the seller’s standpoint, revenue is recognized at time of sale, provided that the
future returns can be reasonably estimated (there are five other conditions that must also be
met but they are of no concern here). If sales returns cannot be reasonably estimated, then
sales revenues are not recognized until returns can be reasonably estimated or (more likely) the
return privilege has substantially expired. Hence, it is not cash flow differences that are at issue
but rather the ability to estimate the expected returns that is the key point. Investment tax credit
(assume no investment tax credit carryforward problem): All of the cash benefits in the form of
lower taxes are received in the year of asset acquisition. The enterprise may recognize benefit
(in the form of lower tax expense) in the year of acquisition or the benefits may be spread over
the life of the asset in the form of lower annual depreciation. Oil and gas accounting: SFAS No.
19 tried to allow only “successful efforts.” In successful efforts, the costs of dry holes must be
written off once it is known that the holes are dry. If (and only if) a well were successful, drilling
costs would be capitalized and amortized over future years.View Solution:
Cadenhead presented an approach to uniformity referred to as circumstantial

ANSWER
http://paperinstant.com/downloads/cadenhead-presented-an-approach-to-uniformity-referred-to-
as-circumstantial/

1/1
Powered by TCPDF (www.tcpdf.org)

You might also like