Wiley GAAP 2014: Interpretation and Application of Generally Accepted Accounting Principles

36   ASC 605 REVENUE RECOGNITION

REVENUE RECOGNITION—GENERAL PRINCIPLES

Subtopics

Revenue recognition concerns

Revenue recognition—general guidelines

Problems in Revenue Recognition

Financial statement presentation: gross versus net

Reporting taxes collected as revenue

Barter transactions

Channel stuffing

Mischaracterization of extraordinary or unusual transactions as components of gross revenue

Mischaracterizing transactions as involving “arm's-length” third parties, thus justifying unwarranted gain recognition

Selling undervalued assets to generate reportable gains

Deliberate misstatement of percentage of completion on long-term construction contracts

LONG-TERM CONSTRUCTION CONTRACTS (ASC 605-35)

Perspective and Issues

Definitions of Terms

Concepts, Rules, and Examples

Methods of Accounting

The percentage-of-completion method

The completed-contract method

Preferability assessment

Costs Incurred

Precontract costs

Contract costs

Estimated costs to complete

Subcontractor costs

Back charges

Example of back charge situation

Types of Contracts

Example of contract types

Revenue Measurement

Example of percentage-of-completion (cost-to-cost) and completed-contract methods with profitable contract

Contract Losses

Example of percentage-of-completion and completed-contract methods with loss contract

Combining and Segmenting Contracts

Joint Ventures and Shared Contracts

Accounting for Change Orders

Accounting for Contract Options

Accounting for Claims

Accounting Changes

SERVICE REVENUES (ASC ...