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15 Cards in this Set
- Front
- Back
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Revenue Rec Criteria all must be met |
1) Performance has been achieved (persuasive evidence of arrangement existing, delivery and price is fixed or determinable) 2)Revenue can be reliably measured (including returns) 3) Collection is probable |
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For sale of goods when is performance achieved? |
1) Transfer of significant risks and rewards from seller to buyer 2) No continuing managerial involvement |
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What about the sale of services or long term contracts? |
Accounted for using either the percentage of completion method or the completed contract method |
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Explain the percentage of completion method…. |
Used when the contract involves more than one act to be completed by seller Revenue is recognized over time based on a reasonable method, ex passage of time, costs completed etc |
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Explain completed contract method…. |
Used when there is only one act of the seller of when progress to completion cannot be reliably measured Basically revenue is only recognized at completion |
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When for services or long term contracts under percentage of completion method should you use a straight line approach |
When the number of acts completed over a specified period of time is indeterminable |
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What should percentage of completion never be based of? |
Billings UNLESS they accurately reflect the work completed |
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Payments from seller to customers in form or discounts/rebates are treated how? |
Net of sales price |
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How about specific costs seller reimbursed customer for? |
IF it is an identifiable benefit to seller, it is recognized as a separable cost incurred |
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Bundle Sales - multiple deliverables are recorded separately if following criteria is met |
1) Performance on remaining deliverables is probable 2) Deliverables have value on a stand alone basis |
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Consignment when to recognize rev? |
When cosignee sells good |
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Can you recognize goods with right of return that cant be estimated? |
No it is not appropriate to record revenue
If you can estimate the returns, recognize revenue net of returns |
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Price protection/ inventory credit arrangements |
Do not recognize revenue until the price protection period has passes unless the future possible price decreases can be reasonably estimated |
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Refundable fees for services |
Refundable if customer cancels contract, do not recognize in revenue until cancellation period is over |
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Criteria under ASPE to determine principal vs agent |
1) Entity has primary responsibility for providing goods or services to customer and fulfilling order 2) Entity has inventory risk before and after the customer order, during shipping or on return 3) Entity has latitude in establishing prices either indirectly or directly 4) The entity bears the customers credit risk for the amount receivable from customer |
