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What must happens in order to trigger Revenue Recognition?
You must be able to identify a "Critical Event" that triggers recognition.
That event which establishes the first point in time where revenue meets all conditions for recognition.
What are the conditions for Revenue Recognition?
- 1. Earned
- 2. Realized or Realizable
- 3. Measurable
- 4. Special Situation
What is the definition of an Earned condition for revenue recognition?
-substantially everything done to indicate that the earning process is completed; often, it is the point in time where the revenue could be legally claimed.
What is the definition of an Realized or Realizable condition for revenue recognition?
- to be recognized, there must be a reasonable expectation of collection.
Installment and cost recovery methods.
What is the definition of an Measureable condition for revenue recognition?
-revenue must be subject to reasonal estimation to be recognized.
What is the definition of an Special Situation condition for revenue recognition?
- includes Commodities, franchises, retail land sales, insurance, buy-back checks.