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SAB 104 Discussion Paper

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Because revenue is important to every company and there’re a going concern with issues of the new revenue recognition. The Boards had revised the proposals for public comment before issuing standard in 2008, 2010 and 2011. In 2008, a Discussion Paper was issued by the Boards as their initial proposal on how to identify separate performance obligations on the basis of the timing of transfer of the good/service to the customer only. Internal control of this transaction was also proposed in this paper also. In 2010, the Boards issued an Exposure Draft based on all the feedback received. This is when the core principle was established that entities should recognize revenue to depict the transfer of promised goods or services to a customer in an …show more content…

The SAB 104 is a revised of Revenue Recognition of the SAB 101. There are five steps to achieve the core principle of SAB 104. First, identify the contract with a customer, identify the seller’s obligations. SAB 104 didn’t provide specific guidance on persuasive forms of evidence, but it could be written contract, sale receipt, or other forms of written or electronic evidence. Second, identify the performance obligations (promises) in the contract. Third, determine the transaction price. Fourth, allocate the transaction price to the performance obligations in the contract. Lastly, recognize revenue when (or as) the reporting organization satisfies a performance obligation. Entity should facilitate assessment of whether the obligation undertaken by the seller has been completed. There are two models on the revenue recognition base on delivery. The completed performance (immediate recognition) in which a single point in time when the seller performs obligation and buyer receives benefit. The Proportional performance (recognition over performance period) is when the seller performs and customer receives value over time. Examples of SAB 104 Revenue Recognition Delivery are advertising revenue or subscription for annual membership where cash is collected upfront. SAB 104 doesn’t have specific guidelines for Revenue recognition’s determination of collectability as long as whether the revenue is realizable. For examples, payment history, credit checks, early cancellation provisions. If collectability is not reasonably assured, revenue received from the transaction should not be recognized upon receipt of cash. Although in the old principal (SAB No.101) doesn’t have to be followed by steps like the new principal (SAB No. 104), but they are very

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