Revenue Recognition (ASC Topic 606): Identify The Contract Part 2 1.5 CPE

This course is a continuation of the discussion of Step One in the (ASC 606) revenue recognition process: Identifying the Contract.  Specifically, this session delves further into the considerations surrounding contract modifications, change orders, unpriced change orders, cancellations, non-finalized changes and accounting treatment when a contract does not exist.

On May 28, 2014, the Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) issued converged guidance on recognizing revenue in contracts with customers.  The objective of the guidance is to establish principles to report useful information to users of financial statements about the nature, amount, timing and uncertainty of revenue from contracts with customers.  The new guidance provides several benefits to financial statement users.  Entities applying the new standard for contract revenue recognition will follow five steps:

• Identify the contract with the customer
• Identify performance obligations
• Determine transaction price
• Allocate transaction price to performance obligations
• Recognize revenue when each performance obligation is satisfied

The course utilizes many examples from numerous industries to enhance learning of the various concepts.

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 components and requirements around contract modifications.
• Identify methods to determine contract modification status.
• Explore accounting considerations for contract modifications.
• Identify methods to account for unpriced change orders.
• Explore modifications that fall under the cumulative catch-up accounting rules.
• Explore accounting for non-finalized contract changes.
• Explore accounting for contract cancellations.
• Identify accounting treatment when it is determined a contract does not exist.
• Explore the concept of contract combinations.

Last updated/reviewed: July 19, 2025