ASPE 3400 requires a separate assessment for deposits in addition to revenue recognition criteria.

ASPE 3400 requires a separate assessment for deposits in addition to revenue recognition criteria.

• A. Only for refundable deposits
• B. False
• C. True
• D. Only when deposit equals revenue

Answer: (C)

Deposits from customers are prepayments that create a liability because the seller has not yet earned the revenue by delivering the goods or performing the service. Under ASPE 3400, you must evaluate these deposits separately from the normal revenue recognition criteria. Revenue should be recognized only as the related performance obligation is satisfied. Until then, the deposit is recorded as a liability (deferred revenue or customer deposits) on the balance sheet. Whether the deposit is refundable or non-refundable affects the presentation, but the central idea is that deposits represent an obligation to the customer and are not revenue at receipt. This separate assessment ensures revenue is recognized only when the performance conditions are fulfilled.

Deposits from customers are prepayments that create a liability because the seller has not yet earned the revenue by delivering the goods or performing the service. Under ASPE 3400, you must evaluate these deposits separately from the normal revenue recognition criteria. Revenue should be recognized only as the related performance obligation is satisfied. Until then, the deposit is recorded as a liability (deferred revenue or customer deposits) on the balance sheet. Whether the deposit is refundable or non-refundable affects the presentation, but the central idea is that deposits represent an obligation to the customer and are not revenue at receipt. This separate assessment ensures revenue is recognized only when the performance conditions are fulfilled.