FAR 2 - Financial Reporting Disclosures

Question 1

Give examples of output method and input method of revenue recognition.

Answer 1

Output: Milestones achieved (whether production or distribution related)

Input: Resource consumption, labor hours expended, and costs incurred relative to total expected costs

Question 2

What is a contract modification and what condition must be present to be accounted for as a separate contract

Answer 2

A contract modification represents a change in the price or scope (or both) of a contract approved by both parties. The modification is treated as a new contract if the scope increases because of the addition of distinct goods or services and the change in contract price represents stand-alone prices.

Question 3

Benefits are received by the buyer as the seller performs is indicative of what type of revenue recognition

Answer 3

Over time

Question 4

Provide examples of when revenue would be recognized at a point in time

Answer 4

Physical possession of the asset has transferred to the buyer.

The buyer has legal title to the asset.