ASC 606 Performance Obligations: Principal-Agent, Warranties, Rights, and Returns 2 CPE

Note: This course title has been enhanced from what you will see on the first screen of the recording.  The enhancement was for purposes of allowing the audience to have a better understanding of the content.  The course information did not change only the course name updated.

This is the second course in the ongoing series evaluating the (ASC 606) Revenue Recognition Standard.  This course relates to step two of the standard “Considerations for Performance Obligations”.  Part 1 evaluated the concept of distinct and non-distinct goods and services and how they related to performance obligations.

Properly identifying performance obligations is a critical step in the five-step revenue recognition model.  It is a step that must be completed at the inception of the contract and prior to moving on to step three of the model.  As discussed in segment one on performance obligations, there are many types and variations of obligations and as such, management will be required to utilize significant judgment when applying this step.  However, it is important that the judgment be supported by considerations of the proper factors.

The course further evaluates areas that impact performance obligations.  We utilize multiple examples from various industries to illustrate the considerations that must be evaluated in line with both identifying performance obligations and allocating the transaction price appropriately. 

 

Note: Information within this course comes from readily available public domain documents and is utilized by the trainer as a supplement for relaying the course content.

Resources Consulted: • ASC 606-10-32-15 to 32-20, 55-244 to 55-246. • ASU 2014-09: “Revenue from Contracts with Customers.” BC229-BC247. • Croner-I, “A14 Revenue from Contracts with Customers.” (2019). Section 7.4.2-2 and 7.4.2-2. • FASB, ”Revenue Recognition Implementation Q&As.” January 2020). Questions 31-37. • FASB TRG Memo 20: “Significant Financing Components.” 26 January 2015. • FASB TRG Memo 30: “Significant Financing Components.” 30 March 2015. • EY, Financial Reporting Developments: “Revenue from contracts with customers.”January 2020. Section 5.5. • KPMG, Handbook: “Revenue Recognition.”December 2019. Section 5.5. • PWC, “Revenue from contracts with customers”March 2020. Section 4.4. • https://www.revenuehub.org/

Prerequisites

No Advanced Preparation or Prerequisites are needed for this course. However, it is recommended to take the other courses in the series prior to completing this one.

Learning Objective

• Explore the concept of revenue recognition related to performance obligations that may involve components such as:
  • Options to purchase additional goods/services
  • Identifying material rights
  • Shipping and handling charges
• Identify and examine factors impacting performance obligations including:
  • Principal vs. agent status
  • Warranties
  • Options for additional goods and services
  • Non-refundable up-front fees
  • Stand-ready obligations
  • Rights of returns

Last updated/reviewed: March 8, 2024