Revenue Recognition Discuss transition methods of this new revenue standard, i.e., how an entity should apply this new standard for the first time. Which transition method do users/investors of financial statements likely prefer? Why? Which transition method do preparers of financial statements likely prefer? Why?
Revenue Recognition Discuss transition methods of this new revenue standard, i.e., how an entity should apply this new standard for the first time. Which transition method do users/investors of financial statements likely prefer? Why? Which transition method do preparers of financial statements likely prefer? Why?
Chapter1: Financial Statements And Business Decisions
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Revenue Recognition
Discuss transition methods of this new revenue standard, i.e., how an entity should apply this new standard for the first time. Which transition method do users/investors of financial statements likely prefer? Why?
Which transition method do preparers of financial statements likely prefer? Why?
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Step 1
This question deals with revenue recognition transition methods of the new revenue standard under FASB.
Step 2
The transition methods that are used in the new revenue standard are as follows:
- Full retrospective method
- Modified retrospective method
- Cumulative effective method
Step 3
The manner by which an entity will apply this new standard for the first time are as follows:
- Entity should identify the contract with the customer.
- Entity should identify the performance obligations within the contract.
- Entity should determine the overall transaction price of the contract.
- They should allocate the transaction price between the identified performance obligations.
- Entity should recognize revenue as performance obligations are satisfied.
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