Revenue recognition

In order to be awarded CPD units you must answer the following five random questions correctly. If you fail the test, please re-read the article before attempting the questions again.

  1. Why did the IASB and FASB feel the need to issue a discussion paper on revenue recognition?

  2. What is the objective of the Boards in producing the discussion paper on revenue recognition?

  3. Under the proposed standard when would a company would recognise revenue?

  4. In principle, the model set out in the discussion paper could apply to all contracts. Which of the following type of contract is it felt that the model would not be appropriate for?

  5. Under the proposed model, what is the principle behind the recognition of revenue?

  6. Entity A agrees to sell Entity B a product for £50,000, which is the transaction price. Entity A has an obligation to provide a product worth £50,000 and a right to receive payment of £50,000. The company must account for this transaction as follows:

  7. Entity A agrees to sell Entity B a product for £50,000, which is the transaction price. Entity A has an obligation to provide a product worth £50,000 and a right to receive payment of £50,000. Entity A completes a sale and has no further obligation to deliver goods. The company must account for this transaction as follows under the discussion paper:

  8. An entity sells an item with a warranty for £9,000. If it sold the item and the warranty separately it would cost £8,000 for the goods and £2,000 for the warranty. The company must account for this transaction as follows under the discussion paper:

  9. The transfer of assets in the revenue recognition model proposed by the discussion paper is based upon what principle?

  10. The discussion paper may have a significant effect particularly on accounting for: