Chapter 4 - Revenue Flashcards Preview

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Flashcards in Chapter 4 - Revenue Deck (11)
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1
Q

What are the five steps in revenue recognition?

A
  1. Identify the contract
  2. Identify the separate performance obligations
  3. Determine the transaction price
  4. Allocate the transaction price to the performance obligations
  5. Recognise revenue as or when a performance obligation is satisfied
2
Q

What is the criteria to account for revenue from a contract?

A
  • parties have approved the contract
  • payment terms can be identified
  • contract has commercial substance
  • probably that the selling entity will receive consideration
3
Q

What are performance obligations?

A

Promises to transfer distinct foods or services to a customer

4
Q

What issues will we need to consider for the transaction price?

A
  • variable consideration
  • financing
  • consideration payable to customer
  • non-cash consideration
5
Q

What needs to be done if a contract contains variable consideration?

A

Must estimate the amount it expects to receive

6
Q

What happens if financing is involved?

A

If more than one year then the consideration needs to discounted to present value using the rate at which the customer borrows money

7
Q

How is non-cash consideration be measured?

A

At fair value

8
Q

How should consideration payable to a customer be accounted for?

A

As a separate purchase transaction

9
Q

When is revenue recognised?

A

When an entity satisfies a performance obligation by transferring a promised food or service to a customer

10
Q

What is the criteria for satisfying a performance obligation over time?

A

One of;

  1. Customer simultaneously receives and consumes the benefits from entity’s performance
  2. Creating or enhancing an asset controlled by the customer
  3. Cannot use the asset for an alternative use
11
Q

What must an entity capitalise in a contract costs?

A
  • costs of obtaining a contract

- costs of fulfilling a contract that do not fall within the scope of another standard