Revenue Recognition: Fundamental Principles (Portfolio 5100)

Description

Portfolio 5100-2nd, Revenue Recognition: Fundamental Principles (Accounting Policy and Practice Series), represents the first of a series of Portfolios on revenue recognition. This Portfolio analyzes general principles governing revenue recognition. A number of revenue recognition principles apply to all types of transactions, whether they involve products or services and whether they are completed in one step or involve a long-term contract. This Portfolio refers to these principles as “fundamental principles.”

The Portfolio surveys the concept of revenue recognition, the relevant accounting literature, and the methodology of researching a revenue recognition issue. The Portfolio discusses in detail the four basic recognition criteria – persuasive evidence of an arrangement; delivery of goods or performance of services; fixed or determinable sales price; and reasonably assured collectibility. The Portfolio also discusses accounting for nonmonetary transactions; reporting revenue gross v. net; measuring revenue when the consideration is stock; determining whether certain amounts collected by a vendor should be included in revenue; determining whether certain types of discounts or sales incentives should be recorded as a reduction in revenue; and principles related to financial statement disclosure.

In addition, the Portfolio analyzes multiple-element arrangements. Transactions involving multiple elements must be analyzed to identify the deliverables (if any) that must be examined separately with respect to revenue recognition. This Portfolio analyzes when a transaction is considered a multiple-element arrangement; how to determine the separate units of accounting within a multiple-element arrangement; and how to allocate the total arrangement consideration among the units of accounting.

This Portfolio may be cited as Bloomberg Tax Portfolio 5100-2nd, Starczewski, Mallek, and Beil, Revenue Recognition: Fundamental Principles (Accounting Policy and Practice Series). Within the Accounting Policy and Practice Portfolio Series, however, references to the Portfolios will include only the Portfolio numbers and titles.

 Note: Various FASB documents, copyright by the Financial Accounting Standards Board, 401 Merritt 7, P.O. Box 5116, Norwalk, CT 06856-5116, U.S.A., are reprinted with permission.

Table of Contents

I. Overview
II. Fundamental Principles of Revenue Recognition
III. EITF Issue 00-21, “Revenue Arrangements with Multiple Deliverables”
IV. Financial Disclosures and Income Statement Presentation