Revenue Recognition – Identify the Contract Part 2

This course is a continuation of discussion over Step One in the revenue recognition process of Identify 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 FASB and 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.

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/

Field of Study: Accounting