Question

Do you agree with the accounting treatment that Overstock typically applied to the revenues generated by its "Partner" line of business? Why or why not?

Answer 1

Yes, I agree with the accounting treatment that overstocks typically applied to the revenues generated by its partner line of business.

This supports the accounting treatment under the matching principle as the business ensures a direct link with the cost of particular stock to the revenue it generates.

The matching principle directs a company to report an expense on its income statement in the period in which the related revenues are earned. It also results in a liability to appear on the balance sheet for the end of the accounting period.

If an expense is not directly tied to revenues, the expense should be reported on the income statement in the accounting period in which it expires or is used up. If the future benefit of a cost cannot be determined, it should be charged to expense immediately.