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?

A customer’s acceptance of an asset is an indicator that the customer has obtained control of it. Acceptance clauses need to be carefully evaluated to determine when a customer obtains control of the good or service. If a reporting entity can determine whether the customer will accept the good or service based on the terms of the agreement (e.g., acceptance is only contingent on meeting size or weight specifications), then the actual acceptance is a formality and the transfer of control maybe determined prior to actual acceptance. Reporting entities should evaluate their historical experience when making this determination.

If a reporting entity cannot determine whether the customer acceptance will be received based on the terms of the agreement, then it will not be possible to conclude that the customer has obtained control.

For products that are delivered on a trial, or evaluation, basis where the customer is not committed to pay until after a specified period, control does not transfer until the customer accepts the product or the trial period ends.

ASC 606-10-55-85 through 88

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