Chapter 6 Flashcards
Five key steps of core revenue recognition
Identify the contract, identify performance obligations, determine transaction price, allocate transaction price, recognize revenue
How does a seller allocatedtransaction price to specific performance obligation
Stand-alone selling price
What criteria determines it a company can recognize revenue over time.
Consumer consumes benefit as work is being done.
Residual approach
Total transaction price - known contract obligation prices
Adjusted market Assessment approach
Price others are selling it for
Expected cost + margin approach
Cost plus appropriate margin
Functional IP
Stand alone value, one time purchase, revenue recognized once
Symbolic IP
No standalone functionality, mandatory updates, revenue recognized over-time
Bill and hold arrangement
Customer pays seller to reserve item to ship at a later date; revenue recognized at delivery
Consignment
Goods transferred to a third party to sell
Contract liability
Seller received payment before satisfying performance obligation
Contract asset
Seller has a right to receive payment after satisfying performance obligation
Customer options (gift cards, discounts, etc)
Performance obligation
Expected value
The possible amount multiplied by it probability
Most likely method
Full bonus or no bonus
