Acc206 Quiz Ch 18

Front 1

what is a top fraud risk?

Back 1

revenue recognition

Front 2

regardless of GAAP or IFRS, the risk or errors and inaccuracies in revenue reporting is significant

T/F

Back 2

true

Front 3

revenue from contracts with customers adopt which revenue recognition approach?

Back 3

asset-liability approach

Front 4

accounting for revenue based on the asset or liability arising from contracts with customers

Back 4

asset-liability approach

Front 5

why are contracts analyzed?

Back 5

- contracts indicate terms and measurements of consideration

- without contracts, companies cannot know whether promises will be met

Front 6

five step process for revenue recognition

Back 6

1. identify the contract with customers

2. identify the separate performance obligations in the contract

3. determine the transaction price

4. allocate the transaction price to the separate performance obligations

5. recognize revenue when each performance obligation is satisfied

Front 7

what is the revenue recognition principle?

Back 7

recognize revenue in the accounting period when the performance obligation is satisfied

Front 8

an agreement between two or more parties that creates enforceable rights or obligations

Back 8

contract

Front 9

contracts can be...

Back 9

written, oral, or implied from customary business practice

Front 10

contract asset =

Back 10

rights received (greater than) performance obligation

Front 11

contract liability =

Back 11

rights received (less than) performance obligation

Front 12

who obtains the rights to received consideration and assumes obligations to transfer goods or services?

Back 12

the company

Front 13

rights and performance obligations gives rise to an...

Back 13

(net) asset or (net) liability

Front 14

contract with customers: revenue cannot be recognized until when?

Back 14

a contract exists

Front 15

contract with modifications:

Back 15

change in contract terms while it is ongoing

Front 16

during a contract modification companies determine...

Back 16

- whether a new contract/ performance obligation results

or

- whether it is a modification of the existing contract

Front 17

a separate performance obligation accounts for as a new contract if both of the following conditions are satisfied:

Back 17

1. promised goods or services are distinct

&

2. the company has the right to receive an amount of consideration that reflects the standalone selling price of the promised g+s

Front 18

no a separate performance obligation leads to

Back 18

prospective modification

Front 19

during prospective modification a company should...

Back 19

- account for effect of change in period of change as well as future periods if change affects both

- not change previously reported results

Front 20

under the prospective approach, a ______ price is used for sales in the periods after the modification

Back 20

blended

Front 21

amount of consideration that company expects to receive from a customer

Back 21

transaction price

Front 22

why is transaction price in a contract often easily determined?

Back 22

bc customer agrees to pay a fixed amount

Front 23

in other contracts, companies must consider what about transaction price?

Back 23

variable consideration

TMV

non cash consideration

consideration paid or payable to the customer

Front 24

probability-weighted amount in a range of possible consideration amounts

Back 24

expected value

Front 25

expected value may be appropriate when?

Back 25

if a company has a large number of contracts with consideration amounts

Front 26

expected value can be based on

Back 26

a limited number of discrete outcomes and probabilities

Front 27

the single most likely amount in a range of possible consideration outcomes

Back 27

most likely amount

Front 28

most likely amount may be appropriate when?

Back 28

if the contract has only two possible outcomes

Front 29

companies only recognize variable consideration if...

Back 29

1. they have experience with similar contracts

2. are able to estimate the cumulative amount of revenue

3. they do not expect a significant reversal of revenue previously recognized

...if criteria are not met, rev. recognition is constrained

Front 30

in non cash consideration, companies generally recognize revenue on the basis of...

Back 30

the fair value of what is received

Front 31

which elements, in general, reduce the consideration received and the revenue to be recognized?

Back 31

discounts, volume rebates, coupons, free products/services

Front 32

allocating transaction price:

adjusted market assessment approach

Back 32

estimate the price that customers in that market are willing to pay for the g+s

may include referring to prices from the company's competitors for similar goods

Front 33

allocating transaction price:

expected cost plus a margin approach

Back 33

forecast expected costs of satisfying a performance obligation (revenue) and then add an appropriate margin for that g/s

Front 34

allocating transaction price:

residual approach

Back 34

a company may estimate the standalone selling price by (total transaction price - sum of observable standalone selling price) as promised in the contract

Front 35

when does a company satisfy its performance obligation?

Back 35

when the customer obtains control of the good or service

Front 36

change in control indicators

Back 36

1. company has a right to payment for asset

2. company has transferred legal title to asset

3. company has transferred physical possession of asset

4. customer has significant risks and rewards of ownership

5. customer has accepted the asset

Front 37

revenue recognition issues

Back 37

right of return

consignments

repurchase agreements

warranties

bill and hold

nonrefundable upfront fees

principal agent relationships

Front 38

two types of contract assets

Back 38

1. unconditional rights

2. conditional rights

Front 39

unconditional rights contract assets

Back 39

receive consideration because the company has satisfied its performance obligation

Front 40

conditional rights contract assets

Back 40

receive consideration because company has satisfied one performance obligation but must satisfy another performance obligation before it can bill the customer

Front 41

companies disclose qualitative and quantitative information about the following:

Back 41

- contracts with customers

- significant judgments

- assets recognized from costs incurred to fulfill a contract

Front 42

companies provide a range of disclosures:

Back 42

- disaggregation of revenue

- reconciliation of contract balances

- remaining performance obligations

- cost to obtain or fulfill contracts