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Renee Rampulla. Revenue Recognition
Table of Contents
Guide
Pages
Chapter 1 Revenue Recognition - The Need for Change. Learning objectives
Background
Key point
Knowledge check
Subsequent developments
Key point
Scope and scope exceptions. Within the scope of FASB ASC 606
Not-for-profit entities
Collaborative arrangements
Contracts partially within the scope of FASB ASC 606
Scope exceptions
Example 1-1 Scope and scope exceptions
Contract with a customer
Assessment
The core five principles
Key point
Knowledge check
Effective dates
Key point
Chapter 2 Identifying The Contract With a Customer. Learning objectives
Overview
Key point
Key definitions used in this chapter
The difference between revenue and gains
Exercise 2-1
Knowledge check
How to identify a contract(s) with a customer
Key point
Enforceable rights
Collectability
Key point
Example 2-1 Mitigating credit risk
Facts:
Assessment
Conclusion
Key point
Exercise 2-21
Exercise 2-32
Exercise 2-43
Portfolio approach
Knowledge check
Reassessment
Example 2-24 Reassessing the criteria for identifying a contract
Facts
Conclusion
Knowledge check
Combining contracts
Knowledge check
Connected concepts: Practical point for management
Connected concepts: Practical point for small and medium-sized private companies
Notes
Chapter 3 Identifying The Performance Obligations in the Contract. Learning objectives
Overview
Identifying the performance obligations in the contract
Promised goods and services identified in a contract
Key point
Example 3-1 Determining whether a customer received a material right/separate performance obligation
Determining whether shipping and handling activities are separate performance obligations
Connected concepts: Practical point for management
Accounting policy election
Knowledge check
Example 3-2 When goods or services are distinct
When goods and services are not distinct
Example 3-3 When goods and services are not distinct within the context of a contract with a customer
Example 3-4 Combining goods and services into one performance obligation
Connected concepts: Practical point for management
Connected concepts: Practical point for small- and medium-sized private companies
Knowledge check
Exercise 3-1
Exercise 3-2
Chapter 4 Determining the Transaction Price. Learning objectives
Overview
Determining the transaction price
Key point - Accounting policy election
Disclosure example1
Transaction price considerations
Key point
Variable consideration
Estimating variable consideration
Connected concepts: Practical point for management
Connected concepts: Practical point for small- and medium-sized private companies
Example 4-1 Estimating variable consideration - Performance bonus or penalty?
Exercise 4-1 Variable consideration - Bonus vs. refund
Exercise 4-2 Price concession — Estimating variable consideration when it is not constrained
Exercise 4-3 Application of a volume discount
Example 4-2 Rebate — Estimating variable consideration
Exercise 4-4 Variable consideration — Coupons
Knowledge check
Refund liabilities
Exercise 4-5 Product sold with a right of return
Significant financing component
Key point - Practical expedient — Policy election
Example 4-3
Knowledge check
Noncash consideration
Example 4-4
Knowledge check
Consideration payable to a customer
Exercise 4-6 Consideration payable to a customer
Knowledge check
Constraining estimates of variable consideration
Exception to constraining estimates of variable consideration
Exercise 4-7 Estimating variable consideration when it is constrained
Knowledge check
Note
Chapter 5 Allocating the Transaction Price to the Performance Obligations in the Contract. Learning objectives
Overview
Allocating the transaction price to the performance obligations in the contract
Stand-alone selling price
Key point
Estimating the stand-alone selling price
Connected concepts: Practical point for management
Adjusted market assessment approach
Expected cost plus a margin approach
Residual approach
Connected concepts: Practical point for small- and medium-sized private companies
Example 5-1 Allocating the transaction price to the performance obligations in the contract
Knowledge check
Allocation of a discount
Example 5-21 Allocating a discount
Example 5-3 When the residual approach is appropriate
Example 5-4 When the residual approach is inappropriate
Variable consideration
Example 5-5
Key point
Exercise 5-1
Exercise 5-2
Knowledge check
Change in the transaction price
Key point
Example 5-6 Modification: Unpriced change order
Connected concepts: Practical point for management
Connected concepts: Practical point for small- and medium-sized private companies
Disclosure example2
Knowledge check
Notes
Chapter 6 Recognizing Revenue When a Performance Obligation Has been Satisfied. Learning objectives
Overview
Recognize revenue when (or as) the entity satisfies a performance obligation. Transfer of control
Key point
Performance obligations satisfied at a point in time
Key point
Knowledge check
Performance obligations satisfied over time
Simultaneous receipt and consumption of the benefits of the entity’s performance
Customer controls the asset as it is created or enhanced
Entity’s performance does not have an alternative use
Enforceable right to payment
Reasonable measure of progress
Example 6-1 How is the performance obligation satisfied?
Example 6-2 Subscriptions received as part of a membership
Knowledge check
Exercise 6-1
Exercise 6-2
Exercise 6-3
Exercise 6-4
Key point
Appropriate methods of measuring progress include output methods and input methods
Key point
Practical expedient
Connected concepts: Practical point for management
Connected concepts: Practical point for small- and medium-sized companies
Example 6-3 Modification resulting in cumulative catch-up adjustment 1
Knowledge check
Exercise 6-5
Disclosure example: Accounting policy for revenue recognition2
Notes
Chapter 7 Special Considerations Under FASB ASC 606. Learning objectives
Overview
Licensing
Determining whether software intellectual property is distinct in cloud computing arrangements
Key point
Recognizing revenue at a point in time or over time
Sales-based or usage-based royalties
Disclosure example: Accounting policy for revenue recognition1
Example 7-1 Recognizing revenue at a point in time2
Example 7-2 Recognizing revenue over time3
Exercise 7-1 License of IP4
Knowledge check
Warranties
Warranty as a guarantee
Warranty as a performance obligation
Key point
Example 7-3 When a warranty is not a separate performance obligation5
Example 7-4 When a warranty is a separate performance obligation
Knowledge check
Principal versus agent
Key point
Acting as a principal
Acting as an agent
Example 7-5 Promise to provide goods or services (entity is a principal)6
Exercise 7-2 Entity acting in the capacity of a principal 7
Example 7-6 Entity acting in the capacity of an agent8
Knowledge check
Incremental costs of obtaining a contract with a customer. Incremental costs recognized as an asset
Key point
Practical expedient
Incremental costs expensed when incurred
Measurement of incremental costs recognized as an asset
Disclosure example: Recognizing assets from costs to obtain contracts with customers9
Example 7-7 Contract costs10
Knowledge check
Exercise 7-3 Costs that give rise to an asset11
Repurchase agreements
A Forward or a call option
A put option
Consignment arrangements
Bill-and-hold arrangements
Key point
Connected concepts: Practical point for management
Connected concepts: Practical point for small and medium-sized companies
Notes
Chapter 8 Presentation and Disclosure Requirements Under FASB ASC 606. Learning objectives
Overview
Other presentation matters. Contract assets and contract liabilities
Statement of financial position
Example 8-1A
Example 8-1B
Example 8-21 Facts
Knowledge check
Exercise 8-12
Disclosures
Key point
Policy election to omit certain disclosures. Applicable to private entities and some others
Certain entities outside the scope of the policy election
Knowledge check
Disaggregation of revenue disclosures
Disclosure example: Disaggregation of revenue by geographic location, customer type, and contract type
Disclosure of contract balances
Key point
Performance obligations disclosures
Performance obligations satisfied
Remaining performance obligations yet to be satisfied
Transaction price allocated to the remaining performance obligations
Disclosure of significant judgments
Disclosures for determining the transaction price and the amounts allocated to performance obligations
Key point
Knowledge check
Connected concepts: Practical point for management and small- and mediumsized entities
Example 8-3 Disaggregation of revenue–quantitative disclosure (paragraphs 296–297 of FASB ASC 606-10-55)
Example 8-4 An excerpt from Microsoft Corporation’s June 30, 2018, Form 10K - Note 1 Accounting policies regarding revenue recognition. Revenue Recognition
Assets Recognized from Costs to Obtain a Contract with a Customer
Notes
Chapter 9 Transition Guidance and Available Resources. Learning objectives
Transition methods and effective dates
Effective dates
Transition methods
Connected concepts: Practical point for management and small and mediumsized entities
Transition summary for public and non-public business entities
Disclosure example in first year of adoption
Key point
Knowledge check
Available resources
FASB resources
AICPA resources
Knowledge check
AICPA Audit and Accounting Guide Revenue Recognition
The AICPA revenue recognition task forces
Appendix A REVENUE RECOGNITION TASK FORCE STATUS OF IMPLEMENTATION ISSUES
Aerospace and Defense Revenue Recognition Task Force
Airlines Revenue Recognition Task Force
Asset Management Revenue Recognition Task Force
Brokers and Dealers in Securities Revenue Recognition Task Force
Engineering and Construction Contractors Recognition Task Force
Depository and Lending Institutions Revenue Recognition Task Force
Gaming Revenue Recognition Task Force
Health Care Entities Revenue Recognition Task Force
Hospitality Entities Revenue Recognition Task Force
Insurance Entities Revenue Recognition Task Force
Not-for-Profit Entities Revenue Recognition Task Force
Entities with oil and Gas Producing Activities Revenue Recognition Task Force
Power and Utility Entities Revenue Recognition Task Force
Software Entities Revenue Recognition Task Force
Telecommunications Entities Revenue Recognition Task Force
Timeshare Entities Revenue Recognition Task Force
Chapter 10 A Comparison between IFRS and US GAAP. Learning objectives
Overview
The collectability threshold
Effective dates and early application. Effective dates
Early adoption
Impairment loss reversal
Relief for nonpublic entities
Accounting policy elections
IFRS requires entities to
Noncash consideration
Licenses of intellectual property
Interim disclosure requirements
Interim disclosure examples — Revenue recognition adoption. FASB ASC 606 adoption - Interim disclosure
IFRS 15 adoption — Interim disclosure
Knowledge check
Notes
Accounting and Auditing Glossary
Index
REVENUE RECOGNITION: MASTERING THE NEW FASB REQUIREMENTS. BY RENEE RAMPULLA, CPA, CGMA
Solutions. Chapter 1
Chapter 2
Chapter 3
Chapter 4
Chapter 5
Chapter 6
Chapter 7
Chapter 8
Chapter 9
Chapter 10
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