Intermediate Accounting (16th Edition)

Published by Wiley
ISBN 10: 1118743202
ISBN 13: 978-1-11874-320-1

Chapter 2 - Conceptual Framework for Financial Reporting - Review and Practice - Questions - Page 62: 19


Generally, the revenue recognition criteria requires companies to recognize revenue during the accounting period through which performance obligation is satisfied. in the case of service, revenue is to be recognized when the service is performed, while in the case of products, revenue is to be recognized when the product is delivered.

Work Step by Step

Generally there are a number of steps that are commonly used by companies to analyze revenue arrangements so as to determine when revenue should be recognized and they comprise of: i. Identify the contract. ii. Identify the separate performance obligations within the contract. iii. Determine the transaction price. iv. Allocate the transaction price to separate performance obligation. v. Lastly, recognize revenue when each performance obligation is satisfied.
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