TO: Daniella Gordon, President of Techco Gaming
FROM: Melissa Cordero, FAU Inc.
DATE: October 19, 2015
SUBJECT: Revenue Recognition according to US GAAP
This memo was written to explain and evaluate the appropriate accounting treatments specified by US GAAP. It outlines the revenue recognition principle as well as proper accounting treatments for Techco Gaming’s recent transactions. The researched sections include Revenue Recognition, Core Revenue Recognition, Single Point or Over a Period of Time Revenue Recognition, Revenue for Contracts and Financial Statement Note Disclosures.
Revenue recognition accounting standard ensures the correct revenue is recorded for each period of the income statement, it was previously based on the realization principle - requires revenue to be recognized when the earning process is virtually complete and is certain to collectability. FASB & IASB developed a new revenue recognition standard, Revenue from Contracts with Customers,” on May 28, 2014, ASU No 2014-09. (RRPA Revenue Recognition and Profitability Analysis-1-LO1-5).
CORE REVENUE RECOGNITION
An entity recognizes revenue when goods or services that are transferred to customers for the amount the entity is expected to be entitled to receive in exchange for goods or services and there are five steps used to apply the principle. (FASB ASC 606-1-SUMMARY-2).
Step 1: Identify the contract(s) with a customer.
Step 2: Identify the performance obligations