CFE Study Questions With Correct Answers

CFE Study Questions With Correct
Answers

Revenue recognition criteria (ASPE) - CORRECT ANSWER✔✔-Revenue recognition
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criteria (ASPE)
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• Performance is complete (risks and rewards transferred, significant acts
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performed)
• Consideration is measurable
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• Collection reasonably assured
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Reference: ASPE 3400.04 - .06
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Revenue recognition - performance criteria (ASPE) - CORRECT ANSWER✔✔-
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Revenue recognition - performance criteria (ASPE)
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• Persuasive evidence of an arrangement exists
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• Delivery has occurred or services rendered
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• Price to the buyer is fixed or determinable
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Reference: ASPE 3400.07| |




Revenue recognition - Returns (ASPE) - CORRECT ANSWER✔✔-Revenue
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recognition - Returns (ASPE)
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,• If significant and unpredictable amounts of goods being returned, do not
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recognize revenue |




Reference: ASPE 3400.21 | |




Revenue recognition - Multiple deliverables (ASPE) - CORRECT ANSWER✔✔-
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Revenue recognition - Multiple deliverables (ASPE)
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• Evaluate all deliverables to determine whether they represent separate
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deliverables
• If you can identify separate deliverables, revenue recognition criteria should be
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assessed for each deliverable separately
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• If two or more transactions are linked together in such a way the commercial
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effect can't be understood without reference to the series of transactions as a
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whole, then the recognition criteria will be applied to the series of transactions as
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one
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Reference: ASPE 3400.11 | |




Revenue recognition - Services and long-term contracts (ASPE) - CORRECT
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ANSWER✔✔-Revenue recognition - Services and long-term contracts (ASPE) | | | | | | |




• Performance determined using either the percentage of completion method or
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the completed contract method, whichever relates the revenue to the work
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accomplished
• Percentage of completion
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o Revenue recognized as work progresses (based on sales value, associated costs,
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extent of progress or number of acts) on a straight-line basis, unless another
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method better reflects the pattern of performance
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,o Must be able to estimate with reasonable assurance
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o Costs must be recorded
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• Completed contract
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o Revenue not recognized until contract complete
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o Only appropriate if substantial completion depends on specific event or can't
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reasonably estimate extent of completion
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Reference: ASPE 3400.06, .16 - .18| | | | |




Revenue recognition - Gross vs. Net (ASPE) - CORRECT ANSWER✔✔-Revenue
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recognition - Gross vs. Net (ASPE) | | | | |




• No impact on net income
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• When acting as principal in a transaction, revenues should be reported at gross
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• When acting as agent in a transaction, revenues should be reported at net
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Reference: ASPE 3400.23 - .24 | | | |




Liability characteristics (ASPE) - CORRECT ANSWER✔✔-Liability characteristics
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(ASPE)
• A duty to others requiring future settlement of assets or provisions
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• Can't avoid duty
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• Event that caused the obligation has occurred
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Reference: ASPE 1000.29 | |

, Current liabilities (ASPE) - CORRECT ANSWER✔✔-Current liabilities (ASPE)
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• Current liabilities include amounts payable within one year from the B/S date or
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within the normal operating cycle
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• They also include deferred revenue amounts due from customers within a year
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or within the normal operating cycle
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• Obligations where contractual arrangements have been made for settlement
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from non-current assets should be excluded from current liabilities
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Reference: ASPE 1510.08 - .10 | | | |




Asset criteria (ASPE) - CORRECT ANSWER✔✔-Asset criteria (ASPE)
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• Future benefit
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• Entity can control the benefit
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• Event that caused benefit already occurred
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Reference: ASPE 1000.25 | |




Inventory valuation (ASPE) - CORRECT ANSWER✔✔-Inventory valuation (ASPE)
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• Valued at lower of cost and net realizable value (NRV)
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• NRV is the estimated selling price in the ordinary course of business less
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estimated selling costs | |




Reference: ASPE 3031.07, .10 | | |