Complying with Revenue Recognition Standards

Author: Lynn Fountain

Since the updated Revenue Recognition Standard has become effective, organizations have struggled with the many concepts imbedded in each step to ensure they are properly complying with the intent of each step of Topic 606 (ASC 606). When COVID-19 usherd into the world environment in early 2020, it introduced additional issues that must be considered when complying with each of the five steps outlined in the standards. In addition, the impact of COVID-19 impacted the concept of financial statement disclosures related to the standard. This course will focus on how the evolution of the economy (partially resulting from COVID-19) has had a continued impact on the compliance requirements for Topic 606. We will review the 5-step model but focus on concepts that have evolved (because of economic conditions), that companies need to ensure they continually evaluate to ensure proper compliance with the standard.

Publication Date: May 2022

Designed For
Accountants and Finance professionals, Auditors, Executive management/ Board members and Audit Committee members, and Legal and Compliance professionals.

Topics Covered

• Five step model
• Identify the contract
• The five-step revenue model
• Step One: COVID-19 challenges
• Performance obligations
• COVID impact
• Transaction price
• Allocate
• Recognize revenue

Learning Objectives

• Identify the core principles of the updated standards
• Recognize and apply the new revenue recognition core principles and the five-step revenue model and evaluate:
• Step One: Identify the contract and evaluate the impact of COVID-19
• Step Two: Determine performance obligations and evaluate the impact of COVID-19
• Identify a type of output method as it relates to performance obligations
• Identify acceptable methods for measuring progress towards completion
• Step Three: Determine transaction price and evaluate the impact of COVID-19 on step three
• Step Four: Allocate transaction price to performance obligations and evaluate the impact of COVID-19 on step four
• Step Five: Recognize revenue and evaluate the impact of COVID-19 on step four
• Identify COVID and economic considerations on aspects of each step of the revenue recognition model including case scenarios
• Recognize how to evaluate disclosure needs in today's environment
• Identify the driving determinant in evaluating appropriateness of recognizing revenue under the new standard
• Identify the number of criteria that must be met for goods/services to be distinct
• Identify the method for estimating variable consideration that uses the sum of the probability weighted amounts for the range of possible contract outcomes
• Identify what is not one of the appropriate options for a contract modification
• Identify the method that recognizes revenue based on resources consumed, labor hours expended, costs incurred, time elapsed, etc.

Level
Basic

Instructional Method
Self-Study

NASBA Field of Study
Accounting (2 hours)

Program Prerequisites
None

Advance Preparation
None