The focus of the SEC's comment letters to early adopters of ASC 606 included the disaggregation of revenue, recognition of performance obligations, recognition of variable consideration at the inception of the contract, principal versus agent, and sales commissions in contract costs. True False

The focus of the SEC's comment letters to early adopters of ASC 606 included the disaggregation of revenue, recognition of performance obligations, recognition of variable consideration at the inception of the contract, principal versus agent, and sales commissions in contract costs. True False

Auditing: A Risk Based-Approach to Conducting a Quality Audit

10th Edition

ISBN:9781305080577

Author:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg

Publisher:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg

Chapter9: Auditing The Revenue Cycle

Section: Chapter Questions

Problem 19MCQ

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Concept explainers

Cost of Credit

The cost of credit is an extra amount that the borrower has to pay besides the loan amount. These credit charges may vary from loan to loan. The cost of credit includes interest charges, maintenance charges, and arrangement charges. Some of the costs are mandatorily collected by the lender based on the loan amount and tenure of the loan. The cost of credit is also called finance charges of the credit.

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The focus of the SEC's comment letters to early adopters of ASC 606 included the disaggregation of
revenue, recognition of performance obligations, recognition of variable consideration at the
inception of the contract, principal versus agent, and sales commissions in contract costs.
True
False

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Under the new revenue recognition guidance in ASC Topic 606, which of the following statements is true regarding contracts with customer options? In some cases where customers have an option to acquire additional goods or services, an evaluation is required to determine if the option creates an additional performance obligation. An additional performance obligation is created if the customer could obtain the same rights to additional goods or services without entering the contract. An additional performance obligation is created if the option provides the customer a right to purchase the goods or services at the stand-alone selling price for those goods or services. It is generally not considered a performance obligation when a retailer grants a "customer appreciation dividend" to a customer.
I. PFRS 15 provides that where a contract with a customer has multiple performance obligations, an entity will allocate the transaction price to the performance obligations in the contract by reference to their relative standalone selling prices However, if a standalone selling price is not directly observable, the entity will need to estimate it. PFRS 15 suggests the following various methods to estimate the standalone selling price of each performance obligation, exceptA. NetRealizableValueApproachB. AdjustedMarketAssessmentApproach C. ExpectedCostPlusAMarginApproach D. ResidualApproach II. PFRS 15 provides that an entity recognizes revenue from contract with customer over time if anyof the following criteria is met, exceptA. The customer simultaneously receives and consumes all of the benefits provided by theentity as the entity performs.B. The entity's performance creates or enhances an asset that the customer controls as theasset is created.C. The entity has transferred physical…
33. Entity A enter into a long-term contract to provide service. The outcome of the transaction can be estimated reliably and the progress on the contract can be measured with sufficient reliability. According to PPSAS, how should entity A recognize revenue from the contract? On a straight-line basis over the contract term By reference to the stage of completion of the contract at the reporting date Full recognition of contract price upon completion of the contract Only to the extent of costs that are expected to be recovered.
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