Revenue recognition - F2

Question 1

What is the five step process to revenue recognition?

Answer 1

Identify contract
Seperate performance obligations within a contract
Determine the transaction price
Allocate the transaction price to performance obligations in the contract
Recognise revenue when performance obligation is satisfied

Question 2

What must we determine when before satisfying performance obligations?

Answer 2

If they are satisfied at a point in time or over time

Question 3

What does it mean when an obligation is satisfied at a point in time?

Answer 3

Customer obtains control of a promised asset. Control of an asset refers to the ability to direct the use of, and obtain substantially all of, the remaining benefits from the asset

Question 4

What are the indicators of transfer of control?

Answer 4

Entity has a present right to payment for the asset
Customer has legal title to the asset
Entity has transferred physical possession of the asset
Customer has significant risks and rewards of ownerhip of the asset
Customer has accepted the asset

Question 5

What criteria must be met if it is satisfied over time?

Answer 5

Customer simultaneously receives and consumes the benefits provided by the entity’s performance as the entity performs
Entitys performance creates or enhances an asset that the customer controls as the asset is created or enhanced
Entitys performance does not create an asset with an alternative use to the entity and the entity has an enforceable right to payment for performance completed to date