FASB revenue recognition requirements require nonprofits to apply five steps to each type of exchange contract to determine when to recognize revenue. The first 4 steps are (1) identify the contract with the customer, (2) identify the performance obligations in the contract, (3) determine the transaction price, and (4) allocate the transaction price to the performance obligations in the contract. What is the 5th step

Recognize revenue when (or as) the entity satisfies a performance obligation

Explanation:

The known five steps in the revenue recognition process includes

1. Identifcation of the contract(s) with customers.

2. Identify the separate performance obligations in the contract.

3. Determine the transaction price.

4. Allocate the transaction price to the separate performance obligations.and

5. Recognize revenue when each performance obligation is satisfied.

Recognize revenue is important for an entity especially as it fulfill the performance obligation need through the process of transfer of a promised good or service to a customer. If an entity cannot fulfill a performance obligation need in the cost of time, the performance obligation is then fulfilled at a point in time.

When performance obligation is satisfied, there is a change in control. That is a control is transferred when the customer has the ability to direct the use of and obtain substantially all the remaining benefits from the asset or service. Control is also shows if the customer has the ability to prevent other companies from directing the use of, or receiving the benefit, from the asset or service.

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