Revenue Recognition

Question 1

Contract criteria

Answer 1

Parties committed to performance
Terms are identifiable
Commercial substance
Collection is probable

Question 2

Revenue recognition process

Answer 2

Identify contract
Identify separate performance obligation
Determine total consideration 
Allocate consideration 
Recognize when (products) or while (service) obligation is being satisfied.

Question 3

Long Term Contracts Revenue Recognition

Answer 3

Profits are recognized at a point in time (obligation is complete) or Overtime (progress is made). Losses are recognized immediately.

Question 4

CIP - Construction in Progress

Answer 4

Construction in progress - Construction expenses to date = gross profit

CIP = CE + GP
Construction expense is cumulative therefore Gross profit is cumulative

CIP > Billings = Current Asset

Billings > CIP = Current Liabilities