What is the step of income confirmation and measurement in accounting course

2022-06-08 0 By

Revenue recognition and measurement are divided into five steps: first, identify the contract with the customer;The second step is to identify individual performance obligations in the contract.The third step of “revenue recognition” is to determine the transaction price;The fourth step of “Measurement of Revenue”, apportion the transaction price to each individual performance obligation;The fifth step of “Measurement of Income” is to recognize income when performing individual performance obligations.A contract is an agreement between two or more parties to enter into legally binding rights and obligations.It can be written, it can be spoken, it can be any other verifiable form.(1) Conditions for revenue recognition If the contract between the enterprise and the customer simultaneously satisfies the following conditions, the enterprise shall recognize the revenue when the customer obtains the control of relevant commodities: (1) The parties to the contract have approved the contract and promised to perform their respective obligations;(2) The contract specifies the rights and obligations of each party in relation to the transferred goods;③ The contract has clear payment terms related to the transferred goods;④ The contract has commercial substance.That is, the performance of the contract will change the risk, time distribution or amount of the future cash flow of the enterprise;(5) The consideration to which enterprises are entitled due to the transfer of goods to customers is likely to be recovered.For contracts that cannot simultaneously satisfy the five conditions of revenue recognition, the enterprise shall recognize the received consideration as revenue only when the following two conditions are simultaneously met; otherwise, the received consideration shall be treated as liabilities for accounting treatment.These are: A. There is no longer any residual obligation to transfer the goods to the customer;B. There is no need to return the consideration collected from the customer.(2) The merger and change of the contract ① The merger of the contract enterprise and the same customer, at the same time or in A similar period of time has concluded two or more contracts, in meeting one of the following conditions, should be merged into A contract for accounting treatment: A.The two or more contracts are entered into for the same commercial purpose and constitute a package transaction where a loss will occur if one contract does not take into account the consideration of the other contract;B. The amount of consideration for one of the two or more contracts depends on the pricing or performance of the other contracts, and if one contract is breached, it will affect the amount of consideration for the other;C. The commodities promised in two or more contracts (or part of the commodities promised in each contract) constitute a single performance obligation.