Question

What qualitative and quantitative disclosures are required related to revenue recognition?

Short answer

Businesses must publish qualitative and quantitative data on all of the following:

• Contracts with customer
• Significant judgments
• Assets recognized from costs incurred to fulfill a contract

Step-by-step solution

Meaning of Revenue Recognition

Revenue recognition is a concept that defines the conditions in which revenue is recognized. Revenue recognition is a GAAP that specifies and accounts for the conditions under which revenue is recognized.

The qualitative and quantitative disclosures required for revenue recognition

The purpose of revenue recognition disclosures is to facilitate financial statement users to understand the unpredictability, quantity, nature, and timing of revenue and cash flows resulting from customer contracts. The company must issue qualitative and quantitative data on all of the following to attain this goal:

• Contracts with the customers:It involves revenue disaggregation, the display of contract assets and liabilities' opening and closing balances, and their performance obligation’s information.
• Significant judgments:It includes decisions and changes to decisions that affect the transaction price, transaction price allocation, and revenue timing.
• Assets recognized from costs incurred to fulfill a contract:The closing balances of assets considered to achieve or execute a contract, the amount of amortization recognized, and the method utilized for amortization are all included in these disclosures.