CFA Practice Question

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CFA Practice Question

According to generally accepted accounting principles, revenues should be recognized at the earliest date that ______

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,,,,,,
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