FASB revenue recognition requirements require nonprofits to apply five steps to each type of exchange contract to determine when to recognize revenue. The first 4 steps are (1) identify the contract with the customer, (2) identify the performance obligations in the contract, (3) determine the transaction price, and (4) allocate the transaction price to the performance obligations in the contract. What is the 5th step?

Question

Quizplus · Accepted Answer

The final step requires the nonprofit to recognize revenue when or as it satisfies a performance obligation, for example, by providing services. Revenue may be recognized at a point in time or over time. Point in time recognition would be used, for example, when the customer obtains control of the asset being sold. Over time recognition would be required, for example, if a nonprofit agreed to publish a monthly magazine for its members.

FASB Revenue Recognition Requirements Require Nonprofits to Apply Five Steps