Question:
Access the FASB’s Codification Research System at the FASB website ( www.fasb.org ).
Required:
Determine the specific citation for accounting for each of the following items:
1. When a provision for loss is recognized for a percentage-of-completion contract.
2. Circumstances indicating when the installment method or cost recovery method is appropriate for
revenue recognition.
3. Criteria determining when a seller can recognize revenue at the time of sale from a sales transaction in
which the buyer has the right to return the product.
Answer:
The FASB Accounting Standards Codification represents the single source of authoritative U.S. generally
accepted accounting principles. The specific citation for each of the following items is:
1. When a provision for loss is recognized for a percentage-of-completion contract:
FASB ASC 605–35–25–46: “Revenue Recognition–Construction–Type and Production–Type
Contracts–Recognition–Provisions for Losses on Contracts.”
2. Circumstances indicating when the installment method or cost recovery method is appropriate
for revenue recognition:
FASB ASC 605–10–25–4: “Revenue Recognition–Overall–Recognition–
Installment and Cost Recovery Methods of Revenue Recognition.” (Note: ASC 605–10–25–3 also
provides some guidance, as it indicates when installment method is not acceptable).
Access the FASB’s Codification Research System at the FASB website ( www.fasb.org ).
Required:
Determine the specific citation for accounting for each of the following items:
1. When a provision for loss is recognized for a percentage-of-completion contract.
2. Circumstances indicating when the installment method or cost recovery method is appropriate for
revenue recognition.
3. Criteria determining when a seller can recognize revenue at the time of sale from a sales transaction in
which the buyer has the right to return the product.
Answer:
The FASB Accounting Standards Codification represents the single source of authoritative U.S. generally
accepted accounting principles. The specific citation for each of the following items is:
1. When a provision for loss is recognized for a percentage-of-completion contract:
FASB ASC 605–35–25–46: “Revenue Recognition–Construction–Type and Production–Type
Contracts–Recognition–Provisions for Losses on Contracts.”
2. Circumstances indicating when the installment method or cost recovery method is appropriate
for revenue recognition:
FASB ASC 605–10–25–4: “Revenue Recognition–Overall–Recognition–
Installment and Cost Recovery Methods of Revenue Recognition.” (Note: ASC 605–10–25–3 also
provides some guidance, as it indicates when installment method is not acceptable).
