11. Regarding ASC Topic 606 guidance for revenue recognition, which of the follo

Question

11. Regarding ASC Topic 606 guidance for revenue recognition, which of the following statements is not true?

a. Prior to ASC Topic 606, U.S. GAAP related to revenue recognition was generally based on industry-specific guidance.

b. A goal was to create a framework that could be applied to any industry and provide similar results for similar fact sets.

c. ASC Topic 606 is based on principles that are radically different from prior guidance.

d. The FASB was involved with deciding to create a single, unifying framework for revenue recognition.

12. Depreciation is added back to net income to determine cash from operating activities under the indirect method.

True or False

12. Under U.S. GAAP, cash interest from investments is reported on the statement of cash flows as part of investing activities whereas under IFRS, cash interest from investments is reported as part of financing activities.

True or False

Explanation / Answer

Ans:b. A goal was to create a framework that could be applied to any industry and provide similar results for similar fact sets.

Reason: it was based on principle that it should provide a framework where similar rules should apply to all the industries across globe, so there will be uniformity in reporting in the financial statement,

Ans 12: True

Reason:. Depreciation is added back to net income under cash from operating activities to determine cashflow before changes in working capital. As depreciation expenses are non cash items it has no relevance in determining net change in casshflow

Ans 13: True

Reason: thats the disclosure required as specified under US GAAP and IFRS 15: Revenue Recognition.

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