1. Revenues measure the inflow of net assets from operating activities.
2. Expenses provide future benefits, and assets measure the consumption of those benefits.
3. Expenditures on advertising and research must be recognized as expense in the period of expenditure, regardless of the firm’s expectation of future benefits.
4. Expenses measure the outflow of net assets consumed in the process of generating revenues.
5. Cost is the economic sacrifice made to acquire goods or services.
6. Current accounting practice takes the viewpoint of shareholders by reporting the amount of net income available to shareholders after subtracting from revenues all expenses incurred in generating the revenue by claimants (for example, employees, lenders, governments) other than shareholders.
7. Gains/Losses arise from relatively infrequent transactions, and there can be no assurance that they will recur in any future period.
8. Common terminology, but
not
definitions in U.S. GAAP and IFRS, often refers to the difference between sales and cost of sales as gross margin, gross profit, or gross income.
9. The statement of cash flows begin with revenues; for this reason, analysts often refer to revenue growth as “top-line” growth.
10. Most firms display the components of cost of sales.