RaR eBook: Understanding Data Requirements in the Five Step Model for Revenue Recognition

  • Removes inconsistencies and weaknesses in existing revenue requirements

  • Provides a more robust framework for addressing revenue issues

  • Improves comparability of revenue recognition practices across entities, industries, jurisdictions, and capital markets

  • Provides more useful information to users of financial statements through improved disclosure requirements, and

  • Simplifies the preparation of financial statements by reducing the number of requirements to which an organization
    must refer.

A core concept in the new revenue recognition approach is the five-step model for identifying contracts, performance obligations, transaction prices, allocations and timing for revenue recognition. as mentioned below;

  • Step 1: Identify the Contract(s) with the Customer

  • Step 2: Identify the Performance Obligations in the Contract

  • Step 3: Determine the Transaction Price

  • Step 4: Allocate the Transaction Price to the Performance Obligations

  • Step 5: Recognize Revenue when (or as) the Performance Obligation is Satisfied

The keys to a successful implementation necessitate a clear understanding the details and nuances within each of these five steps because they drive the data collection requirements and processes.

This eBook also carries detailed walk through these 5-steps and items to consider for each step.

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