How much do you know about FASB’s new rules on revenue recognition? Take our quiz to find out.
This month, the converged standard on revenue recognition from the Financial Accounting Standards Board and the International Accounting Standards Board finally takes effect for publicly held companies. The standard, called ASC 606 in the United States and IFRS 15 elsewhere, will be a headache for many issuers. How much do you know about ASC 606?
1. Following their converged guidance on recognizing revenue in contracts with customers, how much time did FASB and the IASB allow companies to adopt the standards?
A. 1.5 years
B. 2 years
C. 3.5 years
D. 4 years
2. For privately held companies, the standards take effect for reporting periods beginning after what date?
A. December 31, 2017
B. December 31, 2018
C. December 15, 2019
D. December 15, 2018
3. ASC 606 strengthens disclosure requirements, focusing on three key areas. Which of these is not included?
A. Contracts with customers
B. Contracts with vendors
C. Significant judgments
D. Assets recorded for the costs to obtain or fulfill a contract
4. Which industry, according to experts, will be most affected by ASC 606?
D. Consumer goods
5. There is a five-step process for recognizing revenue under ASC 606. Which of these is not one of the steps?
A. Identify the customer contract, its performance obligations, and the transaction price
B. Allocate the transaction price
C. Recognize revenue
D. Issue a new customer contract
6. ASC 606 allows for two different transition methods: the modified-retrospective method and the full-retrospective method. The latter requires which of these:
A. Recasting all prior years’ data on comparative financial statements
B. Additional GAAP disclosures
C. Evaluating revenue under ASC 605
D. An adjustment to beginning retained earnings in the year of initial application
7. Since September 2016, how many times have the revenue-recognition rule changes been mentioned in earnings-call transcripts?
Answers: 1–C; 2–D; 3–B; 4–C; 5–D; 6–A; 7–A
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