Question

"Revenue Recognition"

The revised revenue recognition accounting standard employs a five-step process to achieve the core principle to recognize income upon the transfer of promised goods or services. Use the Internet or Strayer Library to research a company that bundles a product and a service. Examine income recognition of the bundled product and service for the company by addressing each step in the five-step process for revenue recognition. Give your opinion on the most critical step for accurately reporting revenue in the five-step process. Provide support for your response

Answer 1

Your business is under contract to provide goods or servvices to a customer, you will be required to follow a five step process to recognize revenue.

1. identify contract with a customer

2. identify the separate performance obligations in the contract.

3.determine the transaction price.

4. allocate the transaction price to the separate performance obligations.

5.recogniz revenue when the entity satisfies each performance obligation

The significant management judgment in its application and will require the accumlation of data that may not have been necessary under the previous standerd. You may need to develop new process to capture and document managents judgments. Existing contracts may need to be combined to properly determine revenue recognition under the new model. In some cases, system may need to be updated or upgraded to capture data needed for additional estimates, judgments and disclosures.