13
revenues have been deducted with expenses. To what I have stated in the
previous
chapter,
net
income
plays
a
crucial role as it reflects the company
performances and future cash flow.
First of all, let we have the basic understanding about what is income. Based on
IASB framework paragraph 70 (International Financial Reporting standard
2005), income
is defined as “increases in economic benefits during the
accounting period
in the
form of
inflows or enhancements of assets or
decreases of liabilities that results in increase in equity, other than those
relating
to
contributions
from
equity
participants.”
On
the
other
hand,
according to IASB
framework paragraph 92 (International Financing
Reporting
Standard 2005), income
is recognized in the income statement only if the
increment in the future economic which affects the increment in the assets and
decrement in the liabilities can be measured reliably. Thus, the increment in
assets
and
decrement
in
liabilities
had
simultaneously
affected
the
recognition
of income.
Secondly, let us take a brief look of what revenues really are. To what we can
understand, based on IAS 18, paragraph 7
(International
Financial
Standard),
revenue Is “the gross inflow of economic benefits during the period arising in
the
course
of
the
ordinary
activities
of
an
entity
when
those
inflows
result
in
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