Revenue Recognition (ASC Topic 606): Transaction Price Part 2 1.5 CPE

The new revenue recognition standard (ASC 606) outlines five steps for proper compliance.  At the surface, these steps seem simplistic.  However, there are many components that should be considered within each step based on your process and industry.  Previous courses in this series have covered the standard at a high level and evaluated step one and two of the standard.  They are:

• Complying with the Revenue Recognition Standard
• Revenue Recognition:Considerations for Identifying the Contract - Part One
• Revenue Recognition:Considerations for Identifying the Contract - Part Two
• Revenue Recognition:  Considerations for Performance Obligations – Part One
• Revenue Recognition:  Considerations for Performance Obligations – Part Two
• Revenue Recognition: Determine the Transaction Price Part One

This segment is designed to further evaluate Step Three of the new model dealing with determining the transaction price. The transaction price is the basis for measuring revenue. It is the amount of consideration the entity expects to be entitled  to in exchange for transferring promised goods or services. Determining transaction price requires election of policies and significant use of judgment. 

The new revenue recognition standard provides guidance on specific types of consideration.  This is the second part in a two-part segment that will evaluate the various concepts involved in determining the contract price. 

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.

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 how rights of return impact transaction price.
• Identify how refund liabilities should be handled.
  • Explore examples related to rights of return and refund liabilities.
• Explore how provisions that include a significant financing component impact transaction price.
  • Explore examples of significant financing components.
• Explore how consideration payable to a customer impacts transaction price.
  • Explore examples on consideration payable to a customer.
• Explore how sales based or usage royalties impact transaction price.
  • Explore examples of sales based and usage royalties.

Last updated/reviewed: March 19, 2024