Question

Which of the following statement regarding revenue recognition is correct: a) For revenue recognition over time,...

Which of the following statement regarding revenue recognition is correct:

a) For revenue recognition over time, a company needs to satisfy all three criteria.
b) An airline company can recognize the full consideration in ticket sales as revenue without allocating some portion to loyalty points they reward customers together with the sales.
c) Assurance type of warranty is a separate performance obligation.
d) Under percentage of completion approach, the percentage completed in year 4 can be lower than year 3.
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Answer #1
Revenue is recognized over time if one of the 3 conditions is met. Hence, option (a) is incorrect.
Under percentage of completion approach, the percentage completed in year 4 can not be lower than year 3. hence option d is also incorrect.
An assurance-type warranty promises to repair or replace a delivered good or service if it does not perform as expected. This type of warranty is not a separate performance obligation. Hence, option (c ) is also incorrect.
Hence, option (b) is Correct.
An airline company can recognize the full consideration in ticket sales as revenue without allocating some portion to loyalty points they reward customers together with the sales.
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