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Revenue recognition (5 Steps model framework (Step 1 (identify the…
Revenue recognition
5 Steps model framework
Step 1
identify the contract with the customer
5 attributes at inception
contract approved by the parties
rights can be identified
payment terms
contract has commercial substance
consideration in exchange will be collected
Step 2
Identify the performance obligations in the contract
at the inception contract, the entity asses the G/S promised to the customer
identify a performance obligation
G/S distinct
series of district G/S that are substantially the same and that have the same pattern of transfer to the customer
promis to provide a "distinct" G/S to a customer
Step 3
Determine the transaction price
amount to have in exchange
or the transfer of G/S
past customary practices
transaction price
variable
fixed
nature
timing of payment
discounts, refunds
Step4
Allocate the transaction price to the
performance obligations in the contracts
allocate transaction price
each performance obligation
relfects
amount of consideration
transferring promised G/S
contract w/ multiple PO
allocate transaction price
to PO
by reference
relative standalone selling prices
not observable
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Step 5
Recognise revenue when the entity
satisfies a performance obligation
satisfied
promised G/S
transfer customer
over time
costumer simultaneously
receives and consumes
all bénéfit
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performance creates
asset
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entity performance
not create asset
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enforcables right
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point in time
entity
present right to payment
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transferd
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customer
legal title
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significant risk
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rewards
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value creation process
always depend on the contract
depend on business firm
from 2-5
ageressive method of recognition of the revenu
at 5
normal recognition
at 7
conservative method
at 9
too late
revenue
IFRS
IFRS 15
sale of good
rendering of services
other asset yielding
interest
royalties
dividends
income arising in the course of an entity's ordinary activities
US GAAP
FASB 6
recognition criteria
recognise revenue
transfer promise G/S
consideration in exchange
entity has transferred the risk
rewards of the ownership of the goods
