According to SAB 104, for the revenue to be typically considered realized or realizable and earned, which of the following criteria is NOT met:
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A. B. C. D.C
According to SAB 104 (Staff Accounting Bulletin No. 104), revenue recognition is guided by specific criteria that need to be met for revenue to be considered realized or realizable and earned. Let's analyze each answer option and determine which one does not align with the criteria:
A. Persuasive evidence of an arrangement exists: This criterion ensures that there is a valid agreement or contract between the company and the customer, providing evidence that an arrangement for the sale of goods or services has been made. This evidence could be in the form of a written contract, purchase order, or other documented agreements. If persuasive evidence of an arrangement exists, it supports the recognition of revenue.
B. Services have been rendered: This criterion focuses on whether the company has fulfilled its obligation to provide the promised goods or services to the customer. Revenue should only be recognized when the services have been provided or the goods have been delivered. This ensures that revenue is not recognized prematurely before the company has fulfilled its obligations.
C. Timings have been met: This criterion relates to the timing of revenue recognition. Revenue should generally be recognized when the earnings process is considered complete. The completion of the earnings process usually coincides with the satisfaction of performance obligations, which can be achieved over time or at a specific point in time.
D. Collectability is reasonably assured: This criterion emphasizes the collectability of revenue. It requires that collectability is reasonably assured at the time of revenue recognition. In other words, the company should have a reasonable expectation of receiving payment from the customer for the goods or services provided. If collectability is not reasonably assured, revenue recognition should be delayed until such assurance is obtained.
Based on the explanation above, the criterion that does not align with SAB 104's criteria for revenue recognition is option C. Timings have been met. While timing is an important aspect of revenue recognition, it is not explicitly listed as a separate criterion in SAB 104. The timing of revenue recognition is influenced by the fulfillment of performance obligations, which includes the criteria mentioned in options A, B, and D.
Therefore, the correct answer is C. Timings have been met.