- CFA Exams
- CFA Level I Exam
- Topic 3. Financial Statement Analysis
- Learning Module 18. Understanding Income Statements
- Subject 2. Revenue Recognition
CFA Practice Question
According to generally accepted accounting principles, revenues should be recognized at the earliest date that ______
B. the "critical event" has occurred and collection is reasonably assured.
C. collection has occurred and the "critical event" can be measured.
A. the "critical event" has occurred and the cash proceeds have been collected.
B. the "critical event" has occurred and collection is reasonably assured.
C. collection has occurred and the "critical event" can be measured.
Correct Answer: B
Per SFAC 5, "Recognition and Measurement in Financial Statements of Business Enterprises."
User Contributed Comments 9
| User | Comment |
|---|---|
| 3dmouse | what is "critical event"? |
| Kogelet | critical event is related to timing. |
| albert2008 | SFAC 5 is nice and all, but I don't see "critical event" mentioned in this section of the CFAI materials |
| chessdude | From investopedia: Generally, revenue is recognized only when a specific critical event has occurred and the amount of revenue is measurable. |
| viannie | Critical event in project = milestones This is especially for 'percentage completion' approach of revenue recognition |
| gill15 | Critical event just means you provided your part of the deal, your service has been provided. |
| Safiya921 | My understanding of "Critical Event": An event that has a financial impact on the statements of an entity & therefore entails recognition in the books. |
| chesschh | Keep it simple... critical event is the sale |
| safiullah | the difference between recognition & realization,,,,,, |