FAR F2 Financial Reporting & Disclosures

Question 1

What are the five steps to revenue recognition?

Answer 1

1. Identify the contract
2. Identify separate PO
3. Identify Price
4. Allocate price to each separate PO
5. Recognize revenue upon delivery of service

Question 2

What check list must be satisfied in order to recognize revenue on a contract

Answer 2

All identifiable performance obligations have been delivered to the customer and the customer has control of goods/ service

• all parties have approved the contract
• rights are identified
• payment terms can be identified
• expected future cash flows
• it is probable that the entity will be able to collect all consideration

Question 3

What criteria must be met for a performance obligation be be considered distinct?

Answer 3

• the transfer of the goods and service is separately identifiable from other goods and services in the contact
• customer can benefit from the g&s independently or when combined with the customers own resources