F1 M3 Flashcards
123
123
When can a new K be created or modified?
A K can be modified or a new K can be created if there are certain changes in the
existing K
What is Perf obligation (PO)?
Perf obligation (PO): Promise to deliver a good or service to a customer
when can multiple POs to be recorded and be distinct?
In order for multiple POs to be recorded and be distinct, the good or service MUST be
separately identifiable from other good or services in the K, AND the customer can use
the good or service independently or when combined with the customer’s available
resources
What is Transaction price (TP)?
Transaction price (TP): Amount a company is expected to get paid by their customer for
transferring goods or services
TP should be determined based on considering the effects of?
TP should be determined based on considering the effects of: variable consideration,
significant financing, non-cash considerations, and any consideration payable to
customer (take discounts into effect)
What is Variable consideration?
Variable consideration: Use either probability weight avg or most likely
What is applicable in determining TP for each PO?
Stand-alone selling price, discounts, variable consideration, and transaction price
changes are all applicable for determining TP for each PO
What is the equation used when setting the price of the K?
When setting the price of the K, the comp uses the equation below
- [(Stand-alone price/Total of all stand-alone prices in K) x Price of K being offered to
customer] = amt of rev associated with each PO
What does the amount of rev recognized show?
The amt of rev recognized for each PO using the equation shows how much the PO is
worth in THAT SPECIFIC K (it’s obvs going to be less than its own stand alone price IF
the K is worth less than the FV of the total of all of these POs)
What happens if rev is satisfied at ONE point in time?
If rev is satisfied at ONE point in time: Entity has right to payment and customer has an
obligation to pay for an asset, customer has legal title to the asset, entity has transferred
physical possession of asset, customer has rewards and risks of ownership, and
customer has accepted the asset
what does it mean If there is a verbal agreement to buy something and the good doesn’t require
customization?
If there is a verbal agreement to buy something and the good doesn’t require
customization (more strict), then the revenue can’t be recognized over time, it can only
be recognized at one time (if a house can be bought by others, then the K isn’t exclusive
and therefore can only be recognized at one time)
Can a good that is replaced be recognized over time?
A good that is replaceable can not be recognized overtime.. Only one that is unique (ex:
Delta planes)
What can have rev that is recognized overtime?
Only long-term contracts and subscriptions can have rev that is recognized overtime
(everything else is basically recognized at one point in time)
