Revenue recognition

FAR Chapter 21 · Area III · Blueprint III.C

Revenue is the first line of the income statement and the one most often misstated. One standard, built on five steps, now covers nearly every contract with a customer. The Blueprint asks you to apply the five-step model, to account for contract costs, and to handle the special revenue rules for not-for-profits: pledges, agency transactions, contributed services and noncash gifts. Learn the five steps in order and most questions tell you which step they are testing.

In this chapter

The five-step model
Steps 1 and 2: the contract and the performance obligations
Step 3: the transaction price
Step 4: allocating the price
Step 5: over time or at a point in time
Contract costs, contract balances, and principal versus agent
Not-for-profit revenue
Not-for-profit gifts in kind, services and intermediaries

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

What this chapter covers

The five-step model
contract costs
not-for-profit pledges, agency transactions, contributed services and noncash contributions

Chapter 20: Contingencies and commitments · Chapter 22: Accounting for income taxes