Which of the following items creates complications related to revenue recognition?

• A. Accrual of interest expense
• B. Multiple-element sales arrangements
• C. Payment of dividends
• D. Depreciation of fixed assets

Answer: (B)

Verified step by step guidance

1. Step 1: Understand the concept of revenue recognition. Revenue recognition refers to the process of identifying and recording revenue in the financial statements when it is earned and realizable, not necessarily when cash is received.
2. Step 2: Analyze the options provided in the problem. Each option represents a different financial activity, and you need to determine which one directly impacts the complexity of recognizing revenue.
3. Step 3: Evaluate 'Accrual of interest expense.' This relates to the recognition of expenses rather than revenue, so it does not create complications for revenue recognition.
4. Step 4: Evaluate 'Multiple-element sales arrangements.' These involve transactions where a company delivers multiple products or services as part of a single contract. Determining how to allocate revenue to each element and when to recognize it can be complex, making this a complication for revenue recognition.
5. Step 5: Evaluate 'Payment of dividends' and 'Depreciation of fixed assets.' Both are unrelated to revenue recognition. Payment of dividends is a distribution of profits to shareholders, and depreciation is an expense related to the allocation of the cost of fixed assets over their useful life.