Revenue Recognition Method

Net sales consist primarily of revenue from the sale of hardware, software, digital content and applications, peripherals, and service and support contracts. The Company recognizes revenue when persuasive evidence of an arrangement exists, delivery has occurred, the sales price is fixed or determinable, and collection is probable. Product is considered delivered to the .customer once it has been shipped and title and risk of loss have been transferred. For most of the Company's product sales, these criteria are met at the time the product is shipped. For online sales to individuals, the Company defers revenue until the customer receives the product because the Company legally retains a portion of the risk of loss on these sales during transit. The Company recognizes revenue from the sale of hardware products (e.g., Macs, iPhones, Wads, iPods and peripherals), software bundled with hardware that is essential to the functionality of the hardware, and third-party digital content sold on the

Recognizing revenue on October 2, on the day of the event, is reasonable because now, performance has occurred and all of the risk and rewards have been transferred to the corporation holding the event. Revenue is measurable because the price was already set ($60,000) at the time when the contract was signed. Cost is measurable because the event has already occurred and the case states that DCL has incurred cost of $44,000 on the day of the event. Assuming that collectability is reasonably assured due to the size of the event, this method will cause revenue to be recognized in the fiscal period ended on September 30, 2016.

c. Only after conduct that shows the buyer 's willingness to become owner of the goods.

In 2013 Airbus announced a contract to deliver 50 A380 airplanes to Emirates for $20 billion to be delivered between 2016 and 2018.

A. ASC 605-25-30-2 states that an arrangement consideration shall be allocated at the inception of the arrangement to all deliverables on the basis of their relative selling price (the relative

The accrual basis of accounting uses the adjusting process to recognize revenues when earned and expenses when incurred. The cash basis of accounting recognizes revenues when cash is received and records expenses when cash is paid. An example of accrual basis of accounting is if a company is insuring a building. The insurance company bills the company $600 every six months. If each bill is for six months of coverage, then under the accrual method, the company would not record a $600 expense in January and a $600 expense in July. It would instead record a $100 expense each month for the whole year.

Conditions that must be met for a transfer of receivables to be accounted for a sale are as follows:

Payments for the devices are due upon completion of the installation and final acceptance by the customer.

According to Kimmel, Kieso and Waygandt (2011), "the revenue recognition principle requires that companies recognize revenue in the accounting period in which it is earned." Basically, this means that revenues should be recognized (or in other words recorded) on completion of the process of revenue generation i.e. once revenue has been earned. This is as per the accrual basis of accounting. Essentially, revenue recognition derives its significance from its utilization when it comes to the determination of the specific accounting period in which earnings should be recorded.

Under GAAP, it is possible to use cash-basis or accrual basis accounting for revenue recognition. Under cash basis, revenue is recognized with payment is received. Under accrual basis, revenue is recognized when it becomes economically significant. GAAP has specific requirements for various industries on when an event qualifies to be recognized as revenue.

The Company records deferred revenue when it receives payments in advance of the delivery of products or the performance of services. This includes amounts that have been deferred related to embedded unspecified and specified software upgrades rights. The Company sells gift cards and records deferred revenue upon the sale of the card, which is relieved upon redemption of the card by the customer. Revenue from AppleCare service and support contracts is deferred and recognized ratably over the service coverage periods.

SAB 104 lays down the following conditions that should all be fulfilled to enable revenue recognition in cases on non-delivery of goods: (1) The risks of ownership need to have been transferred to the purchasers, (2) The customers have made commitments, preferably written, to procure the goods, (3) The purchasers call for the ‘bill and hold’ transactions, (4) The buyers should be

Timing of revenue recognition is a crucial part in revenue recognition. According to US GAAP, revenue should be recognized when it is realized/realizable and earned (FASB, 1984, Para. 83).

When the outcome of a transaction involving the rendering of services can be reliably estimated, revenue from the sale of services is based on the level of completion of the transaction at the balance sheet date. The outcome of a transaction can be measured reliably when:

If a Product or Service is bartered for goods or services (therefore not a monetary consideration), or is provided through a transaction that is not at Arm’s Length, the Net Sales Revenue shall be calculated as above, using the average of net prices billed or charged in typical recent Sales of equivalent Products or Services, and if there are