Briefly Outline the Accounting and Reporting of Losses on Purchase

question 146

Essay

Briefly outline the accounting and reporting of losses on purchase commitments when (a) the purchase contract is subject to revision or cancellation and (b) it is non-cancellable and a loss is probable.

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Definitions:

Rate of Return

The percentage of profit or loss on an investment over a specified period.

Annuity

A financial instrument that provides a consistent series of payments to a person, mainly utilized as a source of income for those in retirement.

Required Return

The minimum return an investor expects to achieve by investing in a particular asset, factoring in the risk associated with the investment.

Interest Rate

The proportion, in percentage, charged by a lender to a borrower for the use of assets, usually expressed on an annual basis.