Which of the following situations would require the recognition of revenue to be deferred?
A)when the economic reality of a transaction represents a sale, even though title has not passed to the buyer
B)when the realizability of the receivable from a sale is not reasonably assured
C)when the risks of ownership have been transferred to the buyer
D)when the benefits of ownership have been transferred to the buyer

Question

Quizplus · Accepted Answer

If the realizability of the receivable from a sale is not reasonably assured, revenue recognition should be deferred until the uncertainty is resolved. This could happen in situations like the customer's financial stability is unsure or the product is returnable. A is incorrect because the economic reality of a transaction represents a sale if the seller has transferred the risk and rewards of ownership and the transfer can be measured reliably, regardless of the passing of the title. C and D are incorrect because transferring the risks or benefits of ownership does not always indicate revenue deferral.

Which of the Following Situations Would Require the Recognition of Revenue