Applying ASC 606: Contract Identification and Modifications 1.5 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.

On May 28, 2014, the Financial Accounting Standards Board (FASB) and International Accounting Standards Board (IASB) issued converged guidance on recognizing revenue in contracts with customers (ASC 606).  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

Although these steps may seem simplistic at the surface, within each step are multiple components and considerations users must be aware of.  This course will delve into the many concepts involved in Step One:  Identifying the contract.

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

• Recognize how elements of the new revenue recognition standard differ from the previous standard.
• Explore various criteria in the step “Identify the Contract" including:
  • Approval/commitment of parties
  • Identification of rights of parties
  • Payment terms can be identified
  • The contract has commercial substance
  • Collection is probable
• Identify when a contract modification requires a new contract or can be combined with the original contract.
• Explore accounting for non-contract modifications.
• Explore accounting for contract modifications.

Last updated/reviewed: March 11, 2024