F1M3 Revenue Recognition Flashcards
Under US GAAP. Criteria for revenue recognition
realized or realizable and earned;( transffered obligation, signed contract, settled GS and price, assured collection)
Under IFRS Revenue recognition criteria are
probable of future economic benefit; benefit is measurable reliable (Goods:transaction and measurability, reliability of control, benefit, and risks; Services: measurebility, reliability of economic benefit; IRD: measurability reliability of benefit; Construction contract: measurability reliability of benefits and costs
unearned revenue journal entry
DR: cash CR: unearned revenue (liability); DR: unearned revenue CR: Sales revenue (revenue)
returned sales, types of return and conditions
refund, credit, exchange; condition(not a contingent sale)
returned sales journal entry
date of record: DR cash,AR CR: Revenue; Return:DR Sales return and allowance, CR AR, Allowance for sales return and allowances
Buybacks
DR: cash, AR CR: Liability
Bill and Hold Sales revenue recognition conditions
- transfer of ownership and risks 2. settled GS, Price, delivery schedule 3. goods are separate from seller’s goods
Bill and Hold Sales journal entry
DR cash CR: revenue, due
Consignment indicators
- Gaining control of GS until specific event occurs 2. dealers does not have an unconditional obligation to pay the entity 3. the entity can ask for return or transfer of products
computing revenue of multiple-elements arrangement (bundle)
Revenue should be recognized separately for each elements.
Recognition of royalty revenue
recognized when earned
Recognition of franchise revenue; journal entry
recognized when earned; record as note receivable(DR)
requirement for using completed contract methods
- if remaining cost is not significant; 2. difficult to estimate costs; 3.many contracts; 4. short duration
Purpose of percentage-of-completion methods
reasonably estimate profitability; reliable measurement of process
recognition of installment sales
recognized after delivery
