FR - Revenue (ASPE )

Question 1

What is the Handbook section to find Revenue under ASPE

Answer 1

ASPE 3400

Question 2

What is stated as revenue under ASPE

Answer 2

It is the inflow of cash, receivables, or other considerations arising from the course in ordinary activities, sale of goods, rendering of service, and other use of resource

Question 3

What are the three criteria of revenue recognition

Answer 3

1. Is the performance achieved - Depends on whether goods/ services are sold
2. Is revenue reliably measured - Reliably measured when consideration that entity will receive in exchange for good/ service
3. Collection can be assured - Little risk that the customer will not pay

Question 4

Explain what the sale of goods is.

Answer 4

Involves inventory transferred to customer. Revenue based on the meeting recognition criteria
Take place at the point of delivery to the customer

Question 5

What are the two methods of determining the amount of revenue recognition over long-term contract

Answer 5

1. % of completion method - Performance consists of more than one act
2. Completed contract method - Recognizing revenue at completed contract. When a single act or progress completion cannot be reliably measured

Question 6

When should revenue be recognized from interest, royalties, and dividend

Answer 6

Royalties - Payment made by one company to another company in exchange for the right to use intellectual property
Revenue from this source is recognized when the amount can be measured and collectible

Question 7

Provide the three payment forms from seller

Answer 7

1. Any discount and rebates are netted against the revenue from the sales to the customer
2. A reimbursement of specific costs incurred by the customer that provides an identifiable
3. Any goods or services by customer to seller are treated as a separable transactions and considered an expense or asset purchase

Question 8

Explain when revenue is recognized with multiple deliverables

Answer 8

With multiple recognition, the criteria must be applied to separately identifiable components
Recorded separately from the criteria
1. Performance of any remaining deliverables is probable
2. Deliverables have value on a stand-alone basis

Question 9

If the deliverable is not on a stand-alone basis, what 2 selling methods are included

Answer 9

1. Adjusted market assessment approach - evaluating market condition and estimating the price that the customer would be willing to pay for goods and service
2. Expected cost plus margin approach – Seller estimates the cost of each deliverable and adds appropriate margin

Question 10

When are the performance criteria met

Answer 10

1. Persuasive evidence of an arrangement
   - Customer signing of invoice to indicate receipt of goods
   - Consignment arrangement where revenue should not be recorded until consignee sell goods,
   - RIght to return, may not record revenue until after dates pass of amount return
2. Delivery
   - FOB shipping point - legal title of goods transferred when they leave the place of business
   FOB destination - legal title of the goods transfer when good arrive at the customer place of business.

Question 11

Provide 2 other factor of performance obligation

Answer 11

1. Bill and hold arrangement
2. non-Refundable fee
3. License arrangement
4. Customer acceptance of goods

Question 12

What are 3 factors that can affect the seller’s price to buyer

Answer 12

1. Price protection
2. Cancellable right
3. REfundable fee

Question 13

What are two considerations of the effectiveness of uncertainty in which revenue can’t be recognized

Answer 13

1. Consideration is not determinable
2. Uncertainty regarding the right to return the goods