Revenue recognition: reading contracts

BAR Chapter 12 · Area II · Blueprint II.C

FAR taught the five steps of revenue recognition. BAR hands you the contract, the side letter and the sales report and asks what the revenue should be and when. The Blueprint wants you to interpret agreements and supporting documents to set the amount and timing of revenue, and to use data analytics outputs to find and fix discrepancies. Northwind Robotics, which sells warehouse robots with installation and maintenance, gives us contracts worth reading line by line.

In this chapter

Step 1: is there a contract?
Step 2: finding the performance obligations
Step 3: the transaction price
Step 4: allocating the price
Step 5: over time or at a point in time
Reading special contract features
Modifications and contract costs
Using data analytics to find revenue discrepancies

This chapter has 8 lessons, 50 practice MCQs with explanations and 20 simulations, plus flashcards and a recall sheet.

What this chapter covers

Applying the five steps to contracts and documents
finding and fixing revenue discrepancies in data

Chapter 11: Internally developed software · Chapter 13: Stock compensation