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The new revenue recognition standard (ASC 606) outlines five steps for proper compliance.  At the surface, these steps seem simplistic.  However, there are many components that should be considered within each step based on your process and industry.  Previous courses in this series have covered the standard at a high level and evaluated step one and two of the standard.  They are:

  • Complying with the Revenue Recognition Standard
  • Revenue Recognition:  Considerations for Identifying the Contract – Part One and Part Two
  • Revenue Recognition:  Considerations for Performance Obligations – Part One and Part Two
  • Revenue Recognition:  Determine the Transaction Price – Part One and Part Two

This segment is designed to evaluate Step Four of the new model dealing with allocating the transaction price.  Transaction price is the basis for measuring revenue. It is the amount of consideration the entity expects to be entitled to in exchange for transferring promised goods or services. Transaction price is allocated to performance obligations (PO’s) based on relative stand-alone selling price (SSP).  The standard identifies three separate estimation methods that can be used to estimate stand-alone selling price. These include: Adjusted market assessment approach; expected cost-plus margin approach and residual approach.   These approaches can also be utilized when considering how to allocate discounts and variable consideration. 

Within this segment, we cover the aspects of allocating the transaction price for revenue recognition. 

Learning Objectives

  • Explore step four of the revenue recognition model:  Allocate the Transaction Price.
  • Identify examples of estimation approaches for stand-alone selling price (SSP).
  • Explore the adjusted market assessment estimation approach.
  • Identify examples of the adjusted market assessment approach.
  • Explore the expected cost-plus margin approach.
  • Identify examples of the expected cost-plus margin approach.
  • Explore the residual estimation approach.
  • Identify examples of the residual estimation approach.
  • Explore how to allocate discounts.
  • Explore variances between Accounting Standards Codification (ASC) 605 and ASC 606.
  • Explore how to allocate variable consideration.
Last updated/reviewed: October 10, 2018

Included In Certifications

This course is included in the following Certification Programs:

15 CoursesRevenue Recognition Certification

  1. Overview of Complying with the ASC 606 Revenue Recognition Standard
  2. ASC 606 Revenue Recognition: Considerations for Identifying the Contract Part 1
  3. ASC 606 Revenue Recognition: Considerations for Identifying the Contract Part 2
  4. ASC 606 Revenue Recognition: Considerations for Performance Obligations Part 1
  5. ASC 606 Revenue Recognition: Considerations for Performance Obligations Part 2
  6. ASC 606 Revenue Recognition: Determining the transaction price Part 1
  7. ASC 606 Revenue Recognition: Determining the transaction price Part 2
  8. ASC 606 Revenue Recognition: Allocating transaction price to performance obligations
  9. ASC 606 Revenue Recognition: Recognizing Revenue
  10. ASC 606 Revenue Recognition: Case Scenarios for Identifying the Contract
  11. ASC 606 Revenue Recognition: Case Scenarios for Performance Obligations
  12. ASC 606 Revenue Recognition: Case Scenarios for Transaction Price
  13. ASC 606 Revenue Recognition: Case Scenarios for Allocating Transaction Price & Recognizing Revenue
  14. ASC 606 Revenue Recognition: Case Scenarios for 5 Step Revenue Recognition Process Part 1
  15. ASC 606 Revenue Recognition: Case Scenarios for 5 Step Revenue Recognition Process Part 2

11 Reviews (81 ratings)Reviews

4
Anonymous Author
Good course for regular subscription price (not certification price). Benefited from taking all the courses. A lot of repetition could be viewed as reinforcing or redundant depending on how quickly can learn. Would rely on wording on slides more than those spoken, as less technically precise. Now have strong foundation in ASC 606.
4
Anonymous Author
Another great course from Lynn Fountain - full of examples to clarify the relevant guidance, moving at a great pace, and well organized to facilitate understanding. The series on revenue is an excellent learning opportunity.
5
Anonymous Author
This is the most challenging part of the new pronouncement, for me. The course contained the right amount of detail to retain, and I'm sure I'll reference back to this course in the future.
5
Anonymous Author
This was a tough course due to the massive amount of terminology, but Lynn's examples helped me to learn the material in an efficient and effective way.
5
Member's Profile
A lot of material was covered in this topic, but the instructor provided several examples with thorough details.
5
Member's Profile
The examples were excellent and the material covered was very in-depth and informative. This is a great course.
5
Anonymous Author
What you would expect for a foundation level course. The questions proved to be a nice refresher.
5
Member's Profile
The examples were very helpful and allowed me to get a firm grasp of the material. Thank you!
5
Member's Profile
Good overview of hwo to allocate transaction price based on performance obligations.
4
Member's Profile
great course for financial reporting and accounting professionals
4
Anonymous Author
This course provided a good overview of revenue recognition.

Prerequisites

Course Complexity: Intermediate

No Advanced Preparation or Prerequisites are needed for this course. However, it is recommended to take the other courses in the series prior to completing this one.

Education Provider Information

Company:
Illumeo, Inc., 75 East Santa Clara St., Suite 1215, San Jose, CA 95113
Contact:
For more information regarding this course, including complaint and cancellation policies, please contact our offices at (408) 400- 3993 or send an e-mail to .
Course Syllabus
INTRODUCTION AND OVERVIEW
  2:25Introduction to Revenue Rec: Allocating transaction price to performance obligations
Allocate the Transaction Price
  9:56Allocate
  7:11Adjusted Market Assessment
  8:20Example Two Adjusted Market
  5:04Allocating Variable Consideration Using Adjusted Market
  10:56Expected Cost Plus a Margin
  8:32Residual Approach
  7:30Example Determining Whether Residual Approach Can Be Used
  8:34How to Allocate
  3:14Comparison to ASC 605
  8:13Variable Consideration
  9:56Example Variable Consideration Allocated on Basis of SSP
CONCLUSION
  2:17Summary
CONTINUOUS PLAY
  1:32:07Revenue Rec: Allocating transaction price to performance obligations
SUPPORTING MATERIALS
  PDFSlides: Revenue Rec: Allocating transaction price to performance obligations
  PDFRevenue Rec: Allocating transaction price to performance obligations Glossary/Index
REVIEW AND TEST
  quizREVIEW QUESTIONS
 examFINAL EXAM