Under GAAP rules, a company would not be able to recognize revenue at the time it delivered a product to the customer if
A) It was unable to estimate the likelihood of the product being returned.
B) It had not yet been paid, but felt it could estimate the likelihood of bad debts.
C) It had an obligation to fix the product if it broke, and felt it could estimate the likelihood of having to pay warranty costs.
D) It was being paid in installments.

Question

Quizplus · Accepted Answer

Revenue recognition under GAAP requires that the seller is reasonably sure they will be paid for the goods or services provided. If a company cannot estimate the likelihood of product returns, it introduces significant uncertainty about the realizable revenue, thus preventing revenue recognition at the time of delivery.

Under GAAP Rules, a Company Would Not Be Able to Recognize