A significant financing component will exist if the timing of payment (explicitly or implicitly) provides the customer, or the entity, with a significant benefit or financing the transfer of goods or services. This situation may arise when payment occurs significantly before, or after, a performance obligation has been satisfied.
Factors that indicate a significant financing component exists include the difference between the promised consideration and the cash selling price of the promised good or service and the combined effect of the expected length of time between the time the entity transfer the promised good or service, when the customer pays for it and the prevailing interest rates in the market.
A significant financing component does not exist if any of the following are present:
As a practical expedient, if it is anticipated the timing between an entity transferring a promised good or service and receiving payment is less than one year then an entity can conclude a significant financing component does not exist.ASC 606-10-32-15 thru ASC 606-10-32-17
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