Revenue Recognition

Question 1

5 steps of Rev Recognition

Answer 1

1. Identify contract w/ customer
2. Identify the performance obligation(s) in contract
3. Determine transaction price
4. Allocate transaction price to performance oblig(s)
5. Recog Rev when entity satisfies performance oblig(s)

Question 2

Two types of Contract Asset

Answer 2

Unconditional and Conditional

Question 3

Unconditional Contract asset

Answer 3

entity has right to payment –> AR

Question 4

Conditional Contract Asset

Answer 4

entity must complete another performance oblig before it has a right to payment

Question 5

Terms impacting consideration price

Answer 5

variable consideration (performance bonus), financing component, noncash consideration, consideration payable to customer (volume discounts)

Question 6

Variable Consideration

Answer 6

pricing terms impacted by a future event such as earning a performance bonus for delivering by a certain date

Question 7

Significant Financing Component

Answer 7

contract allows buyer to pay at a much later date (involves interest rev)

Question 8

Noncash Consideration

Answer 8

payment other than cash, use FV of that consideration

Question 9

Criteria for good or service to be distinct

Answer 9

1. customer can benefit from the good or service on it’s own or with other readily avail resources
2. Good or service is separate from other promises in the contract

Question 10

Types of warranties

Answer 10

Assurance and Service Type Extended warranty

Question 11

Assurance warranty

Answer 11

part of purch not separate obligation

Question 12

Service Type and Extended Warranty

Answer 12

option to purch extended warranty as distinctive service