Question

According to FASB ASC 606, which of the following is not part of the five-step approach for revenue recognition?

A) Identify the contract(s) with a customer.
B) Determine the transaction price.
C) Determine whether the buyer will take a discount.
D) Identify the performance obligations in the contract.

Answer 1

The five-step approach for revenue recognition according to FASB ASC 606 involves identifying contracts, determining transaction price, identifying performance obligations, satisfying obligations, and recognizing revenue.

Step-by-step explanation:

According to FASB ASC 606, the five-step approach for revenue recognition includes:

1. Identify the contract(s) with a customer: This step involves determining whether an agreement exists between the company and the customer.
2. Determine the transaction price: This step requires evaluating the amount the company expects to receive in exchange for transferring goods or services.
3. Identify the performance obligations in the contract: In this step, the company needs to identify the promised goods or services in the contract.
4. Satisfy performance obligations: The company must meet its obligations by transferring the promised goods or services to the customer.
5. Recognize revenue: Revenue is recognized when or as the company satisfies a performance obligation.

Out of the given options, C) Determine whether the buyer will take a discount is not part of the five-step approach for revenue recognition.