If an entity recognises the revenue associated with a contract with a customer over time (rather than at a point in time), would this approach be considered more conservative than an approach that defers profit recognition until the completion of the contract (that is, at a future point in time)?

If an entity recognises the revenue associated with a contract with a customer over time (rather than at a point in time), would this approach be considered more conservative than an approach that defers profit recognition until the completion of the contract (that is, at a future point in time)?

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter17: Advanced Issues In Revenue Recognition

Section: Chapter Questions

Problem 4C: One of the more difficult issues that companies face in recognizing revenue is determining the...

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A rationale for recognizing revenue over the life of a contract rather than at a single point in time is that: A. Results are more conservative. B. It provides a better measure of periodic accomplishment. C. It is a better match with legal ownership. D. It results in a lower income tax.
Revenue should be recognized over time when a performance obligation is satisfied over time. That occursif (1) the customer consumes the benefit of the seller’s work as it is performed, (2) the customer controlsthe asset as the seller creates it, or (3) the asset has no alternative use to the seller and the seller can be paidfor its progress even if the customer cancels the contract
Under PFRS 15, when shall a consignor recognize revenue from its consignment sales? When it is probable that future economic benefits will flow to the consignor and the fair value of the revenue can be measured reliably. When the consignor receives cash remittance from the consignee. When the consignor satisfies its performance obligation under consignment contract. When the consignor enters into a consignment contract with a consignee.
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Under the new revenue recognition guidance in ASC Topic 606, which of the following statements is true regarding contracts with customer options? In some cases where customers have an option to acquire additional goods or services, an evaluation is required to determine if the option creates an additional performance obligation. An additional performance obligation is created if the customer could obtain the same rights to additional goods or services without entering the contract. An additional performance obligation is created if the option provides the customer a right to purchase the goods or services at the stand-alone selling price for those goods or services. It is generally not considered a performance obligation when a retailer grants a "customer appreciation dividend" to a customer.
What are the repercussions of taking profit before the contracting company's obligations have completely ended?
The amount of consideration to which the entity expects to be entitled in exchange for transferring promised goods or services to a customer, excluding amounts collected on behalf of third parties" is the definition of Select one: O a. the contract. O b. the performance obligation. O c. the transaction price. - O d. the consideration.
Revenue Recognization Question. What is the significant difference between the Contract-Based Approach (IFRS) and Earnings Approach (ASPE)? Please provide an example for each for a better understanding.
A contract does not qualify for revenue recognition if Either party can unilaterally cancel the contract before performance without compensating the other party. The contract is wholly unperformed. Contract terms allow cancellation without penalty by either party at any time prior to delivery of the goods. Any one of these choices apply.
(Fundamentals of Revenue Recognition) Respond to the questions related to the following statements.1. A wholly unperformed contract is one in which the company has neither transferred the promised goods or services to the customer nor received, or become entitled to receive, any consideration. Why are these contracts not recorded in the accounts?2. Performance obligations are the unit of account for purposes of applying the revenue recognition standard and therefore determine when and how revenue is recognized. Is this statement correct?3. Elaina Company contracts with a customer and provides the customer with an option to purchase additional goods for free or at a discount. Should Elaina Company account for this option?4. The transaction price is generally not adjusted to reflect the customer’s credit risk, meaning the risk that the customer will not pay the amount to which the entity is entitled to under the contract. Comment on this statement.