Revenue Recognition GAAP

Question 1

Revenue recognition US GAAP

Answer 1

a) All four criteria must be met:
i) persuasive evidence of an arrangement exists like signed contract
ii) delivery has occurred or services have been rendered (risks and rewards of ownership transferred)
iii) price is fixed and determinable, no price contingencies (if you get a retroactive discount like volume discount we’ll give you a 10% discount if you sell these many in year one; still withhold from revenue
iv) collection is reasonably assumed (standard collection terms)

Question 2

Revenue recognized from sales of products or disposal of other assets is recognized

Answer 2

on the date of sale which is the delivery date or setting aside of goods

Question 3

Use of entity’s assets

Answer 3

like interest revenue or royalty revenue; revenue recognized as time passes

Question 4

services rendered

Answer 4

revenue recognized when services are rendered and are able to be billed by the entity