Revenue Recognition Flashcards
Single Performance Obligation
When services are all very similar in nature and can be provided to the buyer in a similar manner, this would indicate that the services can be combined into a SPO.
Distinct Obligation
When the buyer can benefit from each service independently or in conjunction with her own available resources and when the promise to deliver each service is separately identifiable from the other services, then the performance obligation overall can be split apart into distinct components.
What is an output method used to recognize revenue?
Milestones achieved - whether production or distribution related
Financing arrangement
The seller will book the transaction as a financing arrangement when the repurchase price is equal to or greater than the original sale price and the expected market value. The repurchase price price must be greater than both the original sale price and the expected market value.
How do you calculate the percentage of the completion method ratio
total cost to date / total estimated cost of contract
How do you calculate GP using the percentage of completion method
Contract Price minus Estimated Costs
Percentage of completion method. When is a net asset or net current liability recognized?
If the sum of cumulative costs incurred plus cumulative GP recognized exceeds cumulative billings, the excess is reported as a CA. If cumulative billings exceed the sum of cumulative costs incurred plus cumulative GP recognized, the difference is reported as a current liability; if the two amounts are equal, no asset or liability is recognized.
