Question

Exxon-Mobile 2018 or 2019 Annual Report , you need to research their AR to understand how they recognize revenue and keep in mind they have many diverse sources of revenue. Why you believe it conforms to GAAP based on ASC 606

Answer 1

Exxon-Mobile recognizes revenue at the amount that it expects to receive when its customers have taken control of the goods being sold. The control is assumed to be given to the customers when there is a title transfer taking place and the risk and reward of ownership has been assumed by the customer. As the company has a diverse source of revenue and prices of certain of its sales are based on price indices which are available only in the next period the revenue is recognized by estimating the realizations that have accrued when the sale is recognized. This is finalized when the price is available. It should be noted, however, that such adjustments are not significant.

This conforms to GAAP based on ASC 606. It is the revenue standard that affects all businesses that enter into contracts with customers to transfer goods and services. Any contract with customers is broken down to the following steps:

· Identify the contract with the customer – Here the criterion is outlined that has to be met when establishing a contract with a customer to supply goods or services.

· Identify the performance obligation in the contract – This deal with handling of distinct performance obligations in the contract.

· Determining the transaction price – Here the transaction price is determined on the basis of the amount the business expects to receive for transferring the goods and services to the customer.

· Allocate the transaction price – Here transaction price is allocated across the contract’s separate performance obligations.

· Recognize the revenue when or as the company/entity satisfies a performance obligation - Revenue can be recognized as the business meets each performance obligation.

The above steps are present in a tangible manner in Exxon-Mobile’s basis of revenue recognition and hence we can say that it conforms to GAAP based on ASC 606.