RAA recognizes an asset that is reported in the financial statements as a. contract asset. b. receivable (a financial asset). c. intangible asset. d. property, plant and equipment.
Rainy August Afternoon Co. (RAA) enters into a service concession arrangement whereby RAA undertakes to build a public infrastructure, operate that infrastructure over a specified period, and thereafter transfer it to the government (the grantor). In addition, RAA is obligated to recondition the infrastructure a year before it is handed over to the government. This is regardless of the infrastructure’s condition and level of usage. In return, the government promises to pay RAA a fixed amount of cash plus interest in each year during the operation period. During the construction period, RAA recognizes an asset that is reported in the financial statements as
a. contract asset.
b. receivable (a financial asset).
c. intangible asset.
d. property, plant and equipment.
If the promise to grant a license is distinct and that the license provides the customer the “right to access” the entity’s intellectual property, how is revenue recognized from the initial fee in the contract?
a. in full when the initial services to setup the contract are substantially performed
b. deferred and amortized over the license period
c. in full upon the signing of the contract
d. in full when the customer obtains and starts using the license
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