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Revenue recognition
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    • Scope: Agreements In & Out of Scope
    • Step 1: Contract Attributes
      • Step 1: Combining Contracts
      • Step 1: Contract Modifications
    • Step 2: Identify Performance Obligations
      • Step 2: Series, Principal vs. Agent, Warranty & Option
    • Step 3: Determine Transaction Price
    • Step 4 Allocate Transaction Price
    • Step 5 Bill and hold provisions, customer acceptance clauses, and consignment provisions
      • Step 5 Repurchase provisions
      • Step 5: Licensing
      • Step 5 Overtime vs point in time
    • Costs
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General

7
  • How do the revenue and the new lease standards interact?
  • Do I have to recognize variable consideration prior to all contingencies being resolved?
  • How should minimum guarantees in a sales-and-usage-based contract be accounted for?
  • Are ASC 606 and IFRS 15 the same?
  • How does collectability affect revenue recognition?
  • Does VSOE go away under ASC 606?
  • Does ASC 606 replace ASC 605?

Scope: Agreements In & Out of Scope

3
  • Does the agreement create legally enforceable rights between two or more parties?
  • Is the counterparty to the contract a customer?
  • Is the contract a non-monetary exchange between two entities in the same line of business to facilitate sales to customers or potential customers?

Step 1: Contract Attributes

6
  • If the agreement is wholly unperformed, does each party have the enforceable right to terminate the contract without compensating the other party?
  • Has the contract been approved and are both parties committed to perform their respective obligations?
  • Does the contract identify each party’s rights regarding the goods or services to be transferred?
  • Does the contract include payment terms for the goods or services to be transferred?
  • Does the contract have commercial substance?
  • Is it probable that, in exchange for the transferred goods or services, the consideration to which the entity is entitled will be collected?

Step 1: Combining Contracts

4
  • Were multiple contracts with the same customer (including its related parties) entered into at, or near, the same time?
  • Were the contracts negotiated as a package with a single commercial objective?
  • Does the consideration for any of the agreements depend on the price or performance of any of the other contracts?
  • Do the goods or services promised in the contracts represent a single performance obligation?

Step 1: Contract Modifications

4
  • Does the contract modify the scope or price (or both) of an existing agreement?
  • Does the new contract only affect the transaction price?
  • Are the remaining goods or services distinct?
  • Does the new contract add distinct goods or services?

Step 2: Identify Performance Obligations

2
  • Is the promised good or service separately identifiable from other promised goods or services within the contract?
  • Does the option to acquire additional goods or services provide a material right to the customer that it would not receive without entering into that contract?

Step 2: Series, Principal vs. Agent, Warranty & Option

4
  • For promised good(s) or service(s), can the customer benefit from it on its own or with resources readily available?
  • Is the performance obligation a series of goods or services that are substantially the same and that have the same pattern of the transfer to the customer?
  • For the performance obligation is another party involved in transferring the good or service to each customer?
  • Does the warranty offer the customer a service in addition to the assurance that the product complies with agreed-upon specification?

Step 5: Licensing

3
  • Is the performance obligation a license of intellectual property
  • Is the transaction price a sales or usage-based royalty?
  • Does the license have standalone functionality, or is it symbolic?

Step 5 Overtime vs point in time

2
  • Does the customer receive and consume the benefits simultaneously?
  • Does the work create an asset that has no alternative use, and does the entity have an enforceable right to payment (including profit) for work completed to date?

Costs

2
  • Did the company incur costs to fulfill the contract?
  • Do the costs to fulfill the contract have all the following characteristics?

Step 3: Determine Transaction Price

7
  • How to treat fixed cash consideration anticipated to be received?
  • What is the total potential variable consideration?
  • How much consideration is not expected to be received, and / or is expected to be returned due to refunds, price concessions or similar items?
  • Does the transaction price include a significant financing component?
  • What is the fair value of non-cash consideration to be received?
  • What is the total amount of consideration that will be paid to the customer without a distinct good, or service, being receive?
  • What portion of the transaction price relates to rights not expected to be exercised by the customer?

Step 4: Allocate Transaction Price

4
  • What is standalone selling price?
  • How should discounts be treated?
  • How should variable consideration be treated sales- or usage- based consideration?
  • How to allocate total transaction price?

Step 5 Bill and hold provisions, customer acceptance clauses, consignment provisions and repurchase agreements

6
  • Does the agreement include bill-and-hold provisions?
  • Are the products separately identified as belonging to the customer?
  • Is the entity prevented from transferring the product to a third-party?
  • Does the agreement include a customer acceptance clause(s), where compliance cannot be objectively determined that the good(s) are compliant with the agreed-upon specifications in the contract?
  • Does the agreement include consignment provisions or there are indicators that the agreement is a consignment of the related product(s)?
  • Does the contract include repurchase provisions (i.e., an obligation (Forward), right (option) to repurchase the asset OR can the customer require the entity repurchase the asset (Put)
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Costs

Costs

  • Did the company incur costs to fulfill the contract?
  • Do the costs to fulfill the contract have all the following characteristics?

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