Revenue Recognition Flashcards
What are Deferred Credits?
- Future income contracted for and/or collected in advance
- Have not yet been earned
- Located in the liability section
When is Royalty Income Recognized?
When Earned
What is Unearned Revenue?
Revenue Received in advance
How is unearned Revenue Recorded?
Recorded as a liability
When is revenue Recognized if the right to return exists?
conditions to be met
i) The sales price is substantially fixed at the date of sale
ii) The buyer assumes all risk of loss because the goods are considered in the buyers possession
iii) The buyer has paid some consideration
iv) The product sold is substantially complete
v) The amount of future returns can be reasonably estimated
What are Initial Franchise Fees?
o Site selection
o Supervision of construction
o Bookkeeping
o Quality control
What Are Continuing Franchise Fees?
Fees for ongoing services performed by the franchisor
When is Franchise fee revenue recorded as Unearned Revenue?
When Substantial performance on future services has not occured
When is Franchise fee revenue recorded as Earned Revenue?
1) Franchisor has no obligation to refund any payment received
2) Initial Service required of the franchisor has been performed
3) All other conditions of the sale have been met
Can Installment and Cost Recovery Method be Used Under Certain Circumstances for Franchise Recognition
Yes
