ASC 606 Revenue Recognition: Considerations for Identifying the Contract Part 1

Author: Lynn Fountain

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.

Publication Date: December 2023

Designed For
Accountants and Finance professionals, Internal auditors/Professionals considering the role of internal audit, and Legal and Compliance professionals.

Topics Covered

• Explore the distinction between revenue and income
• Recognize how elements of the updated revenue recognition standard differs from the previous standard
• Components that should be considered in the identification of a contract including approval and commitment, identification of rights, identification of payment terms, commercial substance and collectability
• Overview of Contract Modifications

Learning Objectives

• Recognize how elements of the new revenue recognition standard differ from the previous standard
• Identify 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, and collection is probable
• Identify when a contract modification requires a new contract or can be combined with the original contract
• Identify accounting for non-contract modifications
• Identify accounting for contract modifications

Level
Basic

Instructional Method
Self-Study

NASBA Field of Study
Accounting (2 hours)

Program Prerequisites
None

Advance Preparation
None