​Interpret the codification paragraph into ‘plain English’ as best you can.

Interpret the codification paragraph into ‘plain English’ as best you can. In other words, how would you explain the appropriate accounting treatment to a colleague, boss, or business partner who has a basic understanding of accounting?

Here is the codification:(Total 3 codification)

ASC-942-405-25-3 Deposits

The institution’s liability for deposits originates and shall be recognized at the time deposits are received rather than when the institution collects the funds. Checks that are deposited by customers and that are in the process of collection and are currently not available for withdrawal (deposit float) shall be recorded as assets and liabilities. Deposits shall not be recorded based solely on collections.


ASC-942-405-45-4 Interest Payable

The interest paid or accrued on these accounts, commonly referred to as dividends, shall be reported as an expense on the statement of income, and the amount of interest payable to members shall be included as a liability in the statement of financial condition.


ASC-908-605-25-6 Sampling Method

The objective of the sampling method is to recognize revenue on the basis of a survey of lifted off-line and on-line coupons for the period. There are two attributes for which a sample of lifted coupons may be tested:

a. When the revenue passenger mile attribute is used, a sample of the dollar value of coupons is accumulated and divided by revenue passenger miles flown to produce an average yield per revenue passenger mile. These average yields are accumulated for each segment. This average yield is then multiplied by the total number of revenue passenger miles flown by the carrier to determine earned revenue. The average yield per revenue passenger mile is the most common attribute used for sampling systems.

b. The number of revenue passengers attribute system develops an average fare per passenger from the sample. Earned revenue is then determined by applying this average fare to the number of passengers transported for the period.


**Please Interpret the codification paragraph into ‘plain English’ as best you can. In other words, how would you explain the appropriate accounting treatment to a colleague, boss, or business partner who has a basic understanding of accounting?

It should be around 100-150 words per Interpretation, because you have to explain it and explain how to do it.


Here is the example:

ASC 326-20-30-1 Developing an Estimate of Expected Credit Losses

The allowance for credit losses is a valuation account that is deducted from the amortized cost basis of the financial asset(s) to present the net amount expected to be collected on the financial asset. At the reporting date, an entity shall record an allowance for credit losses on financial assets within the scope of this Subtopic. An entity shall report in net income (as a credit loss expense) the amount necessary to adjust the allowance for credit losses for management’s current estimate of expected credit losses on financial asset(s).

Interpretation: The old method of accounting for credit losses required that the losses had actually been incurred by the balance sheet date to be recognized. The new method for accounting for credit losses requires that credit losses are taken when losses are expected to occur over the life of the asset. The effect of this is that losses are accelerated and taken sooner than they would have been under the old method. This allows for credit losses to be treated similarly to doubtful accounts; companies would debit Credit Losses and credit Allowance for Credit Losses to account for expected losses that would occur in the future.

ASC 326-20-30-2 Developing an Estimate of Expected Credit Losses.

An entity shall measure expected credit losses of financial assets on a collective (pool) basis when similar risk characteristic(s) exist (as described in paragraph 326-20-55-5). If an entity determines that a financial asset does not share risk characteristics with its other financial assets, the entity shall evaluate the financial asset for expected credit losses on an individual basis. If a financial asset is evaluated on an individual basis, an entity also should not include it in a collective evaluation. That is, financial assets should not be included in both collective assessments and individual assessments.

Interpretation: Before the Accounting Standards Update, a company could elect whether or not to pool assets based on shared characteristics. After the update, a company is required to pool financial assets with other assets that have shared characteristics when determining potential credit losses. The new updates do allow for assets to be evaluated individually, but only in cases where the asset is not substantially similar to other assets and is not included in a pool of assets.

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