Question

Revenue recognition for students who pay full price—some students prepay for a month’s lunches at the...

Revenue recognition for students who pay full price—some students prepay for a month’s lunches at the beginning of each month and others pay on a daily basis: When should the school district recognize revenue for each type of student payment? Please see below.

The example involves a public school cafeteria serving lunch. Some students pay full price for their food, but others receive lunch for a reduced price or for free under the federal National School Lunch Program. Let's assume the school cafeteria meets all nutritional requirements to qualify for National School Lunch Program - all it needs to do now is serve the lunches. The grant is expenditure driven - when the school district proves the reduced price and free meals have been provided, the federal government owes it a grant payment. Ignore the part of the program that involves school districts receiving free food products from the USDA to use in the meals.

Homework Answers

Answer #1

According to the IFRS criteria, for revenue to be recognized, the following conditions must be satisfied:

  1. Risks and rewards of ownership have been transferred from the seller to the buyer.
  2. The seller does not have control any longer over the goods sold.
  3. The collection of payment from goods or services is reasonably assured.
  4. The amount of revenue can be reasonably measured.
  5. Costs of revenue can be reasonably measured.

Therefore , here since the grand meets all the eligibility criteria,

For the students who pre pay for the month.. revenue can be recognised when the money is recived

In case of student's under National school lunch programme , the revenue can be recognised at the time of serving the meal as the grand is certain

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