Revenue - ASPE 3400

Question 1

Critieria for revenue recognition

Answer 1

Performance is achieved, revenue can be reliably measured and collection is reasonably assured

Question 2

Criteria for performance being achieved

Answer 2

• Persuasive evidence of the arrangement exists
• Delivery has occured or services had been rendered
• Sellers’ price to buyer is fixed or determinable

Question 3

Revenue is reliably measured

Answer 3

when the amount of consideration recieved by the enriry can be determined with certainty

Question 4

Collection is reasonably assured

Answer 4

There is little risk the the customer will not remit the agreed amount of consideration

Question 5

Percentage of completion method

Answer 5

• Used when the contract includes more than one act.
• Revenue is recognized over time, based on a reasonable method (eg passage of time, cost completed, or number of acts.)

Question 6

Completed contract method

Answer 6

• When there is onlu one act by the seller or the progress to completion cannot be measured.
• Recognised on completion

Question 7

Performance is acheived with the sale of goods

Answer 7

• Seller has transferred all significant risks and rewards of ownership
• There is reasonable assurance in the measurement of the consideration

Question 8

Criteria for multiple delverables to be recorded seperately

Answer 8

• Performance of any remaining deliverables is probable
• Deliverables have value on a stand-alone basis

Question 9

Interest

Answer 9

Recognized on a time proportion basis

Question 10

Royalties

Answer 10

Recognized as they accrue according to terms of agreement

Question 11

Dividends

Answer 11

Recognized when the shareholder’s right to receive payment is established

Question 12

Bill and hold

Answer 12

Recognized using criteria when delivery has not occured

Question 13

Upfront non refundable fees or payments

Answer 13

Even if non refundable, should be deferred and recognized over the periods that the fees are earned

Question 14

Gross vs Net

Answer 14

Report gross as principal and net as agent

Question 15

Principal

Answer 15

Promise is a performance obligation to provide goods or services itself. Factors include:
- Primary responsibility for providing goods or services
- Bears Inventory risk and credit risk
- Latitude in establishing prices

Question 16

Agent

Answer 16

Arrange for goods or services to be provided by third party.
- Amount earned is predetermined (fixed fee per transaction or stated oercentage of amt billed)