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Revenue recognition criteria, methods, implications

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What are different criteria for recognizing revenue?

Why are there so many revenue recognition methods?

Why are the methods subjective, and what are the implications on income statement quality?

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Solution Summary

Your response is 377 words and describes estimates needed for revenue recognition methods and why so many methods are needed.

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Revenue recognition is a big area and very important - the revenue is often the largest ingredient in the level of profits and cash reported and the level of success a firm enjoys. The overall criteria are really the same for all transactions - recognize the revenue when the earnings process is complete and the funds are collected or collection is relatively assured. The issue is making sure that (1) the earnings process is complete and (2) collection is relatively assured.

The different criteria are about HOW to make sure that both of these are met! When there are multiple deliveries, it is ...

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Carol Sargent, PhD
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  • BSc, University of Virginia
  • MSc, University of Virginia
  • PhD, Georgia State University
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