PwC Revenue Recognition Survey and SAB 74 Disclosure Guidance
Key findings of PwC’s Revenue Recognition Survey and guidance on using this interactive tool. Expectations and best practices for SAB 74 Disclosures.
Input vs. Output Methods
Explanation of the input and output methods used to recognize revenue over time in ASC 606.
Revenue Recognition Over Time
Description of the three criteria in ASC 606 for determine whether revenue is recognized over time. Illustrative examples of each criterion are included.
Collaboration between FASB and IASB resulted in ASC 606. Filers have choice between Full Retrospective and Modified Retrospective Adoption methods.
Summary of each of the five steps of ASC 606 and key issues entities need to consider when completing each step.
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.
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.
Analysis of the collectability requirement of ASC 606, including accounting for contract’s with initial and subsequent collectability issues.
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.
If a contract modification is not considered a separate contract, entities use the Prospective Treatment method or Cumulative Catch-up Adjustment method.
The FASB and IASB provide a practical expedient on contract modification adjustment – the use of hindsight to account for all changes at once.
Analysis of the updated definition of a customer in ASC 606’s scope considerations, including examples of common transactions in a business context.
Analysis of the scope considerations of ASC 606 and how ASC 606 interacts with other guidance, including an example of a transaction with mixed guidance.
The first step of ASC 606 is to identify the contract with a customer. ASC 606 outlines many criteria, including legal enforceability and collectability.
Three extended examples demonstrating the analyses for determining if goods or services are (1) capable of being distinct and (2) separately identifiable.
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.
Analysis and examples of the new criteria under ASC 606 for identifying separate performance obligations as “distinct within the context of the contract”.
Identify promised goods and services by analyzing customer perspective, immateriality, implicit promises, setup activities, and marketing incentives.
Description and examples of how ASC 606 determines principle vs agent considerations, including new criteria for determination and diversity in thought.
Analysis and multiple examples of ASC 606’s two requirements for treating multiple distinct goods or services as one performance obligation (a series).
Analysis and common examples of how ASC 606 treats stand-ready obligations as potential performance obligations, including diversity in thought.
Analysis of ASC 606’s treatment of payments paid to customers, including the payment types and the timing of recognizing a reduction in revenue.
Analysis and examples of ASC 606’s requirement to constrain variable consideration based upon likelihood and magnitude, including diversity in thought.
Determine the transaction price of a contract with noncash consideration under ASC 606, including when and how to measure variable fair value.
Analysis of revenue recognition for nonrefundable upfront fees under ASC 606, including when fees relate to specific goods or services and material rights.
Analysis of price concessions based on the customer’s expectation and the specific facts and circumstances of the transaction, examples are included.
Depending on the type, a right of return may be a variable consideration under ASC 606.
Analysis of financing components for payments made before or after goods or services are delivered under ASC 606.
Analysis and example of estimating variable consideration and applying the constraint under ASC 606.
Analysis of ASC 606’s approach for estimating the transaction price of a contract with possible discounts for future volume purchases or discount vouchers.
Allocating variable and fixed discounts to the transaction price under ASC 606, includes significant changes from ASC 605 to ASC 606.
Analysis and illustrative examples of the two criteria given in ASC 606 for allocating variable consideration to performance obligations.
An extended example of applying the adjusted market assessment, expected cost plus margin, and residual approaches in estimating standalone selling prices.
A comprehensive example of how transaction price is allocated to performance obligations, including cases involving variable considerations and discounts.
Analysis of ASC 606’s three methods for estimating standalone selling prices and how to allocate allocate the transaction price to performance obligations.
Analysis of step five of ASC 606’s model when a single performance obligation has multiple non-distinct promises, including restrictions, principles, and examples.
ASC 606’s four criteria for determining bill-and-hold arrangements and when these arrangements contains one or more performance obligations.
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.
Explanation and examples of the indicators that a consignment arrangement exists, including comparison to ASC 605.
Criteria for revenue recognition at a point in time, including situations such as bill-and-hold, and consignments.
Explanation of the input and output methods used to recognize revenue over time in ASC 606.
ASC 606’s treatment of revenue and costs from activities performed before the contract establishment date that relate to an anticipated contract.
ASC 606’s treatment of repurchase agreements, including forwards and call options and put options. Examples are included
Description of the three criteria in ASC 606 for determine whether revenue is recognized over time. Illustrative examples of each criterion are included.
Depending on the type, a right of return may be a variable consideration under ASC 606.
Examples and explanation of how revenue should be allocated to performance obligations when breakage is involved.
In today’s mobile and interconnected world, many software companies offer cloud services in conjunction with software licenses, leading to increasingly complex contracts. Additionally, companies across many industries are starting to bill customers using a recurring subscription model. Many software companies…
The licensing of intellectual property (IP) is a common practice in the media and entertainment industry. For example, popular media companies such as Disney, Sony, and DreamWorks own thousands of valuable trademarks, logos, character images, etc. that can be licensed…
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,…
In many FinTech contracts, services get cheaper with higher volume. This article shows the proper accounting for such a contract under ASC 606.
Explore the process of continued improvement to ASC 606 as stakeholders raise concerns, questions, and implementation issues to the TRG.
A comprehensive analysis of the five-step process of ASC 606 applied to a common Software-as-a-Service fact pattern.
Software revenue recognition may change under ASC 606, especially when distinct elements of PCS are determined to be separate performance obligations.
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.
An extended example of applying the adjusted market assessment, expected cost plus margin, and residual approaches in estimating standalone selling prices.
A comprehensive example of how transaction price is allocated to performance obligations, including cases involving variable considerations and discounts.
Implementing ASC 606 will generally require a significant amount of knowledge and time. This article is organized into frequently asked questions and includes guidance for companies implementing internally and for those using a third party consulting firm. Representatives from two…
Key findings of PwC’s Revenue Recognition Survey and guidance on using this interactive tool. Expectations and best practices for SAB 74 Disclosures.
Description and examples of revenue recognition for licenses of intellectual property under ASC 606, including determining license nature and timing of recognition.
Statements made by Chief Accountant of the SEC imply a more authoritative role for the Revenue Recognition TRG; this may have unintended consequences.
FASB Comment Letter on proposed amendments to ASU Topic 606 regarding narrow-scope improvements and practical expedients.
For transitional purposes, the determination of whether contracts are completed or incomplete under the full or modified retrospective methods.
Analysis and illustrative examples of the three criteria an entity must meet to apply the portfolio method as a practical expedient.
Analysis of ASC 606’s treatment of contract fulfillment costs, including scope considerations, the capitalization criteria, amortization, and impairment.
Description of ASC 606’s disclosure requirements regarding contracts with customers, significant judgments involved, and contract cost related assets.
Analysis of incremental costs under ASC 606, including identifying the incremental costs, the criteria for capitalization, and how to amortize these costs.
Analysis of the three factors for determining separate performance obligations and assessing the timing of revenue recognition
Analysis and examples of contract assets and liabilities under ASC 606, including the balance sheet presentation and the impacts of rights to payment.
ASC 606’s exception criteria for sales- and usage-based royalties, including the process for recognizing revenue for these exceptions.
Analysis and an illustrative example of the two types of warranties under ASC 606 and the three factors used to distinguish between these types.
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