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Common ASC 606 Issues: Oil and Gas Entities

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Implementing ASC 606 requires a substantial amount of time and expertise, with specific challenges rising in each industry. Gain a deeper understanding of the key issues that oil and gas entities face as they transition to ASC 606.

Common ASC 606 Issues: Power and Utility Entities

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Implementing ASC 606 requires a substantial amount of time and expertise, with specific challenges rising in each industry. Gain a deeper understanding of the key issues that power and utility entities face as they transition to ASC 606.

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The Five-Step Method

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Input vs. Output Methods

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Revenue Recognition Over Time

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Presentation of Contract Assets and Contract Liabilities

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Standalone Selling Prices

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General Overview

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Implementing ASC 606

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Get practical answers for the most common questions on what to expect when implementing ASC 606's standards in your business.

Overview of ASC 606

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Collaboration between FASB and IASB resulted in ASC 606. Filers have choice between Full Retrospective and Modified Retrospective Adoption methods.

The Five-Step Method

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Summary of each of the five steps of ASC 606 and key issues entities need to consider when completing each step.

Transition Dates and Methods

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Stay up-to-date on an entity’s required ASC 606 transition date and its most beneficial transition method, which varies based on entity type and industry.

STEP 1 : CONTRACT

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Combining Contracts

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Analysis and examples of the criteria for determining if contracts entered into with a customer at or near the same time must be combined for revenue recognition.

Collectibility of Consideration

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Analysis of the collectability requirement of ASC 606, including accounting for contract's with initial and subsequent collectability issues.

Contract Modifications
Part I – Separate Contracts

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Analysis of changes in the price or scope of a contract and whether they qualify as modifications and should be treated as a separate, standalone contract.

Contract Modifications
Part II – Contract Modification Treatment

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If a contract modification is not considered a separate contract, entities use the Prospective Treatment method or Cumulative Catch-up Adjustment method.

STEP 2 : PERFORMANCE OBLIGATIONS

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Distinct Goods or Services: Case Studies

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Three extended examples demonstrating the analyses for determining if goods or services are (1) capable of being distinct and (2) separately identifiable.

Customer Options for Additional Goods or Services

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Analysis and examples of how ASC 606 treats future discounts given to customers in a current sale, including diversity in thought and comparison to ASC 605.

Distinct within the Context of the Contract

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Analysis and examples of the new criteria under ASC 606 for identifying separate performance obligations as "distinct within the context of the contract".

Identifying Promised Goods & Services

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Identify promised goods and services by analyzing customer perspective, immateriality, implicit promises, setup activities, and marketing incentives.

STEP 3 : TRANSACTION PRICE

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Consideration Payable to a Customer

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Analysis of ASC 606's treatment of payments paid to customers, including the payment types and the timing of recognizing a reduction in revenue.

Magnitude of the Constraint on Revenue

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Analysis and examples of ASC 606's requirement to constrain variable consideration based upon likelihood and magnitude, including diversity in thought.

Noncash Consideration

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Determine the transaction price of a contract with noncash consideration under ASC 606, including when and how to measure variable fair value.

Nonrefundable Upfront Fees

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Analysis of revenue recognition for nonrefundable upfront fees under ASC 606, including when fees relate to specific goods or services and material rights.

STEP 4 : ALLOCATE REVENUE

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Allocating Discounts

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Allocating variable and fixed discounts to the transaction price under ASC 606, includes significant changes from ASC 605 to ASC 606.

Allocating Variable Consideration

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Analysis and illustrative examples of the two criteria given in ASC 606 for allocating variable consideration to performance obligations.

Case Study: Estimating Standalone Selling Prices

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An extended example of applying the adjusted market assessment, expected cost plus margin, and residual approaches in estimating standalone selling prices.

Case Study: Transaction Price Allocation

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A comprehensive example of how transaction price is allocated to performance obligations, including cases involving variable considerations and discounts.

STEP 5 : RECOGNIZE REVENUE

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Measuring Progress with Multiple Goods or Services in a Single Performance Obligation

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Analysis of step five of ASC 606’s model when a single performance obligation has multiple non-distinct promises, including restrictions, principles, and examples.

Bill-and-Hold Arrangements

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ASC 606's four criteria for determining bill-and-hold arrangements and when these arrangements contains one or more performance obligations.

Case Study: Revenue Recognition Over Time for Products

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An extended example applying ASC 606's three criteria for recognizing revenue over time to goods and measuring revenue over time using inputs or outputs.

Consignment Arrangements

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Explanation and examples of the indicators that a consignment arrangement exists, including comparison to ASC 605.

CASE STUDIES »

Combining Desktop and Cloud Software: Hybrid Contracts

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Software no longer has industry-specific guidance. See how to recognize revenue for Cloud-Software hybrid contracts under ASC 606. Extended example included.

Minimum Guarantee on Sales- and Usage-based Royalties Case Study

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Analyze a hypothetical licensing contract for IP with sales-based royalties and a minimum guarantee under Accounting Standards Codification (ASC) 606: Revenue from Contracts with Customers.

SmokeyMan LO: Virtual Goods Case Study

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In today’s virtual gaming world, many games across multiple platforms allow players to access their virtual environment for free while in-game purchases of various virtual currencies and goods allow players to enhance gameplay. Popular freemium games such as Candy Crush,...

Case Study: OEMs, Incentives, and Variable Consideration

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Accounting Standards Codification (ASC) 606 places the responsibility on management to recognize revenue in a way that “depict[s] the transfer of promised goods and services to customers in an amount … [they] expect to be entitled,” per ASC 606-10-05-3. For...

OTHER ISSUES »

PwC Revenue Recognition Survey and SAB 74 Disclosure Guidance

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Key findings of PwC's Revenue Recognition Survey and guidance on using this interactive tool. Expectations and best practices for SAB 74 Disclosures.

Licenses for Intellectual Property

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Description and examples of revenue recognition for licenses of intellectual property under ASC 606, including determining license nature and timing of recognition.

SEC Makes TRG Discussions Authoritative

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Statements made by Chief Accountant of the SEC imply a more authoritative role for the Revenue Recognition TRG; this may have unintended consequences.

Comment Letter to Proposed Amendments

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FASB Comment Letter on proposed amendments to ASU Topic 606 regarding narrow-scope improvements and practical expedients.

INDUSTRY-SPECIFIC ISSUES »

Common ASC 606 Issues: Oil and Gas Entities

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Implementing ASC 606 requires a substantial amount of time and expertise, with specific challenges rising in each industry. Gain a deeper understanding of the key issues that oil and gas entities face as they transition to ASC 606.

Common ASC 606 Issues: Power and Utility Entities

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Implementing ASC 606 requires a substantial amount of time and expertise, with specific challenges rising in each industry. Gain a deeper understanding of the key issues that power and utility entities face as they transition to ASC 606.

Common ASC 606 Issues: Industrial Products & Manufacturing Industry

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Implementing ASC 606 requires a substantial amount of time and expertise, with specific challenges rising in each industry. Gain a deeper understanding of the key issues that manufacturing entities face as they transition to ASC 606.

Common ASC 606 Issues: Airline Entities

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Implementing ASC 606 requires a substantial amount of time and expertise, with specific challenges rising in each industry. Gain a deeper understanding of the key issues that airlines face as they transition to ASC 606.