Podcast
Questions and Answers
When is the transaction price recognized for the quarterly newsletters?
When is the transaction price recognized for the quarterly newsletters?
- Over four quarters as the newsletters are provided (correct)
- At the beginning of the contract
- At the end of the fiscal year
- Upon receipt of the payment
What occurs if additional benefits are provided to members by the alumni association?
What occurs if additional benefits are provided to members by the alumni association?
- All revenue must be recognized at once
- Revenue recognition is delayed
- It creates additional performance obligations (correct)
- The transaction price cannot be allocated
What is the recognition criterion for contribution revenue outside of Topic 606?
What is the recognition criterion for contribution revenue outside of Topic 606?
- Recognized when received (correct)
- Recognized based on estimated future benefits
- Recognized at the beginning of the fiscal year
- Recognized upon fulfillment of conditions
What might be necessary for determining revenue recognition according to the new standard?
What might be necessary for determining revenue recognition according to the new standard?
What can assist in enhancing clients' enterprise value according to the firm?
What can assist in enhancing clients' enterprise value according to the firm?
What does the article suggest regarding the uniqueness of revenue situations?
What does the article suggest regarding the uniqueness of revenue situations?
How does practice influence the revenue recognition process?
How does practice influence the revenue recognition process?
What is a key aspect to consider when recognizing revenue under the new standard?
What is a key aspect to consider when recognizing revenue under the new standard?
What is the purpose of debiting the contract liability at the beginning of the semester?
What is the purpose of debiting the contract liability at the beginning of the semester?
How is the refund estimate calculated according to the provided information?
How is the refund estimate calculated according to the provided information?
What indicates that the contract has commercial substance?
What indicates that the contract has commercial substance?
What is the recorded amount per day if the total charges are $10,000 with a 10 percent refund estimate over a 100-day semester?
What is the recorded amount per day if the total charges are $10,000 with a 10 percent refund estimate over a 100-day semester?
Which of the following actions corresponds with the end of the add/drop period if a student drops 10 percent of classes?
Which of the following actions corresponds with the end of the add/drop period if a student drops 10 percent of classes?
What is the estimated refund liability when total charges are $10,000 with a non-refundable deposit of $1,000?
What is the estimated refund liability when total charges are $10,000 with a non-refundable deposit of $1,000?
What is the correct transaction price based on the provided financial details?
What is the correct transaction price based on the provided financial details?
What should the university maintain to satisfy the contract's terms with the corporation?
What should the university maintain to satisfy the contract's terms with the corporation?
What is the first step in adjusting refund liability?
What is the first step in adjusting refund liability?
In which situation must an institution implement procedures to track refund estimates?
In which situation must an institution implement procedures to track refund estimates?
How is revenue recognized according to the new revenue recognition model?
How is revenue recognized according to the new revenue recognition model?
What must be avoided under Topic 606 regarding receivables and deferred revenue?
What must be avoided under Topic 606 regarding receivables and deferred revenue?
What is included in the transaction price in the scenario involving naming rights for a residence hall?
What is included in the transaction price in the scenario involving naming rights for a residence hall?
In what manner is revenue allocated when there is only one performance obligation?
In what manner is revenue allocated when there is only one performance obligation?
What is the consequence of not having an unconditional right to consideration under Topic 606?
What is the consequence of not having an unconditional right to consideration under Topic 606?
How is revenue typically recognized for benefits received and consumed over time?
How is revenue typically recognized for benefits received and consumed over time?
Under Topic 606, when is revenue recognized for a license to intellectual property that has standalone functionality?
Under Topic 606, when is revenue recognized for a license to intellectual property that has standalone functionality?
In the case of a university granting a food service provider the right to provide services, what is the primary basis for revenue recognition during the contract?
In the case of a university granting a food service provider the right to provide services, what is the primary basis for revenue recognition during the contract?
How does the university assess progress in recognizing revenue for the food service contract?
How does the university assess progress in recognizing revenue for the food service contract?
What must the university consider if the license payment is made over the contract term?
What must the university consider if the license payment is made over the contract term?
In this arrangement, what is generated by the capital assets provided by the food service company?
In this arrangement, what is generated by the capital assets provided by the food service company?
What is indicated by the fact that the food service provider simultaneously receives and consumes the benefits of the university's performance?
What is indicated by the fact that the food service provider simultaneously receives and consumes the benefits of the university's performance?
What is implied by the university concluding that the recordings have standalone functionality?
What is implied by the university concluding that the recordings have standalone functionality?
What does the university's exclusive right to provide food services signify about the transaction?
What does the university's exclusive right to provide food services signify about the transaction?
How should revenue be recognized according to the content?
How should revenue be recognized according to the content?
What is the first step in recognizing revenue according to the framework mentioned?
What is the first step in recognizing revenue according to the framework mentioned?
What is considered a performance obligation in the university's case?
What is considered a performance obligation in the university's case?
What happens to the revenue recognition if the performance obligation is only partially satisfied?
What happens to the revenue recognition if the performance obligation is only partially satisfied?
What does FASB ASC 606-10-55 pertain to in this context?
What does FASB ASC 606-10-55 pertain to in this context?
When will the university recognize revenue from food sales?
When will the university recognize revenue from food sales?
What is specifically stated about the university's participation in athletics?
What is specifically stated about the university's participation in athletics?
What is the duration of the agreement with the vendor for the use of the recordings?
What is the duration of the agreement with the vendor for the use of the recordings?
Study Notes
Contract Liability
- The contract is an agreement between the university and a corporation to name a stadium after the corporation.
- The contract details the payment terms and includes the university's obligation to name the stadium and display the name per specifications.
- The university is considered to receive value from the contract as the corporation is receiving advertising.
- The university has determined that the collectability of the consideration is probably, meaning they are confident the corporation will pay.
- The contract is deemed to have commercial substance, as the corporation is receiving value from the agreement.
Revenue Recognition
- The university recognizes revenue by allocating the $13,000,000 transaction price across four quarters based on the quarterly newsletter provided.
- The university only has one performance obligation in the naming rights contract, so the entire transaction price is allocated to this one aspect.
- The university recognizes revenue when the obligation to name the stadium is satisfied, which is done over the 15-year period of the contract.
- The corporation receives and consumes the benefits of the naming rights simultaneously, meaning the university can recognize revenue pro ratably over the contract term.
Performance Obligations
- The university's performance obligation in the contract is to exclusively name the stadium after the corporation, ensuring signage is maintained according to the contract terms.
- The university must fully fulfill this single performance obligation for the naming rights contract.
Other Relevant Concepts
- Revenue recognition models can be complex and vary depending on the specific type of revenue situation.
- The university needs to analyze the terms of the contract carefully to determine the appropriate revenue recognition process.
- Traditionally, universities record receivables and deferred revenue when a bill is rendered and mailed.
- This practice is no longer acceptable under Topic 606 as an unconditional right to consideration doesn't exist.
- In situations where a contract spans multiple fiscal years, the university must implement procedures to track and calculate refund estimates.
- Universities must also record contract liabilities and refund liabilities as appropriate.
Naming Rights (Second Example)
- A university receives $200,000 from an alumnus in exchange for naming a residence hall.
- The university recognizes revenue on a straight-line basis over the term of the contract, starting on the commencement date.
Intellectual Property
- A university has a world-renowned marching band that has recorded marches.
- A vendor wants to use the recordings in advertisements and enters into a contract with the university for a license.
- Revenue is recognized at the beginning of the two-year contract terms because the recordings are standalone and functionality will not change.
Exclusive Food Services
- A university enters a contract with a food service provider to provide food services exclusively.
- The university receives upfront payment and a percentage of food sales from the food service provider.
- Revenue is recognized ratably over the term of the contract because the university is transferring control over time.
Studying That Suits You
Use AI to generate personalized quizzes and flashcards to suit your learning preferences.
Related Documents
Description
This quiz explores the concepts of contract liability and revenue recognition within the context of a university-corporate naming rights agreement. It discusses the conditions that determine collectability and the allocation of transaction price across performance obligations. Test your understanding of these financial principles!
