Financial Reporting And Analysis - Financial Reporting And Analysis Section 1
- Option : B
- Explanation : The appropriate time to recognize revenue would be in the month of August; the risks and rewards have been transferred to the buyer (shipped and delivered), the revenue can be reliably measured, and it is probable that the economic benefits will flow to the seller.
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22. Which of the following is least likely correct regarding revenue recognition principles?
- A
Revenue can only be recognized when cash is received.
- B
Under U.S. GAAP, the price needs to be either determined or determinable for revenue to be recognized.
- C
The IFRS criteria for recognizing royalties is that it is probable that the economic benefits associated with the transaction will flow to the entity and the amount of revenue can be reliably measured.
- Option : A
- Explanation : Receiving cash is not a pre-requisite for revenue recognition.
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- Option : B
- Explanation : The revenue recognized will be the total amount divided by the time period. Therefore, 50000/4 = $12,500.
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- Option : B
- Explanation : Under U.S. GAAP, revenue from barter transactions can be recognized at fair value only if the company has historically received cash payments for such services.
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- Option : C
- Explanation : Under U.S. GAAP, one of the criteria for deciding whether to report revenues gross or net is that the company does bear the inventory risk.
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