2 CPE Entities applying the new Accounting Standards Codification (ASC) Topic 606: Revenue from Contracts with Customers must follow five steps to revenue recognition:
- Identify the contract with the customer
- Identify performance obligations
- Determine transaction price
- Allocate transaction price to performance obligations
- Recognize revenue when each performance obligation is satisfied
This course briefly outlines each of the five steps and then works through various exercises and scenarios covering each of the steps.
The course is a second practice case study course for the new five-step revenue recognition model. It utilizes separate examples from numerous industries to enhance learning of the various concepts.
Note: Information within this course comes from readily available public domain documents and is utilized by the trainer as a supplement for relaying the course content.
Resources Consulted:
• ASC 606-10-32-15 to 32-20, 55-244 to 55-246.
• ASU 2014-09: “Revenue from Contracts with Customers.” BC229-BC247.
• Croner-I, “A14 Revenue from Contracts with Customers.” (2019). Section 7.4.2-2 and 7.4.2-2.
• FASB, ”Revenue Recognition Implementation Q&As.” January 2020). Questions 31-37.
• FASB TRG Memo 20: “Significant Financing Components.” 26 January 2015.
• FASB TRG Memo 30: “Significant Financing Components.” 30 March 2015.
• EY, Financial Reporting Developments: “Revenue from contracts with customers.”January 2020. Section 5.5.
• KPMG, Handbook: “Revenue Recognition.”December 2019. Section 5.5.
• PWC, “Revenue from contracts with customers”March 2020. Section 4.4.
• https://www.revenuehub.org/
Learning Objectives
- Explore step one “Identify the Contract”
- Identify solutions to exercises for step one.
- Explore step two “Performance Obligations”
- Identify solutions to exercises for step two.
- Explore step three “Determine the Transaction Price”
- Identify solutions to exercises for step three.
- Explore step four “Allocate the Transaction Price”
- Identify solutions to exercises for step four
- Explore step five “Recognize Revenue”
- Identify solutions to exercises for step five.
Last updated/reviewed: August 25, 2023
Included In Certifications
This course is included in the following Certification Programs:
17 CoursesRevenue Recognition Certification
- Revenue Recognition (ASC Topic 606) Standard Overview
- Revenue Recognition (ASC Topic 606): Identify The Contract Part 1
- Revenue Recognition (ASC Topic 606): Identify The Contract Part 2
- Revenue Recognition (ASC Topic 606): Performance Obligations Part 1
- Revenue Recognition (ASC Topic 606): Performance Obligations Part 2
- Revenue Recognition (ASC Topic 606): Transaction Price Part 1
- Revenue Recognition (ASC Topic 606): Transaction Price Part 2
- Revenue Recognition (ASC Topic 606): Allocating Transaction Price
- Revenue Recognition (ASC Topic 606): Recognize Revenue
- Revenue Recognition (ASC Topic 606): Scenarios For Identify The Contract
- Revenue Recognition (ASC Topic 606): Scenarios For Performance Obligations
- Revenue Recognition (ASC Topic 606): Scenarios For Transaction Price
- Revenue Recognition (ASC Topic 606): Scenarios For Transaction Price And Recognize Revenue
- Revenue Recognition (ASC Topic 606): Case Scenarios Part 1
- Revenue Recognition (ASC Topic 606): Case Scenarios Part 2
- Revenue Recognition (ASC Topic 606) COVID Implications
- Revenue Recognition (ASC Topic 606): Disclosure Requirements “Contracts with Customers”
49 Reviews (191 ratings)
Reviews
Lawrence Hirsch
(Controller at Builders design)
Truth be told I understood about 10% of the ASC606, the small part that is related to our company's Revenue Recognition model of "completed contract". After taking all of Lynn Fountain's 8 ASC606 courses I would say my understanding has morphed to a 70+% of ASC606 understanding. A GREAT RESULT. There was some redundancy and that redundancy help to drive my understanding of certain concepts. Well done Lynn. Thanks for a great series of courses (8) for ASC606.
Larry
Anonymous
(Revenue Operations Analyst)
The case scenarios courses are imperative to putting your learning to the test. The examples in this course help to clarify what you do and do not understand. At this stage I'm feeling much more confident in my understanding of the 5 steps and a general knowledge of each step.
Arvind Mohan
(Director at RMS)
Some of the concepts discussed in this course - allocation of discounts and variable consideration, lend themselves to better absorption in a traditional class sitting; having said that, the instructor has done the best job she can to explain the nuances.
Anonymous
(Risk manager)
The interesting examples here illustrated the steps to revenue recognition，which will benefit to my work practice。I will practice more questions after finished the course. Thanks for MS. Lynn great work.
Anonymous
(cpa)
Another winner from Ms Fountain's ASC606 series. Examples serve to put previous knowledge together. Appreciate that "almost" all of ASC606 courses are available under standard subscription. Thank you!
Karis Davis
(Finance Director at Belden)
Overall good course. Some of the material was redundant and overlapped with multiple other courses. However, it is a good high-level summary of Revenue Recognition, more appropriate for beginners.
Katherine Hart
(None at Not Applicable)
Again, this is one of my favorite instructors on Illumeo! I love all of her courses. I finished part 1 of this series and am very happy to have more practice by finishing part 2!
Anonymous
(VP, Finance)
This was my final course of this bundled group of courses.
Although, there is a lot of repetition, i found information very useful and supportive to the learning objective.
Inna Shmukler
(Controller at Fornetix LLC)
Good course to solidify the knowledge of the new guidance. I wish it would have included more cases instead of the repetition of the information from prior courses.
Emma Chowns
(Senior Accountant at CipherHealth)
The different perspective on the health club example emphasizing transaction price in this course is helpful to ensure we're really assimilating the information.
Anonymous
(-)
Excellent course with many great examples of how to practice the revenue recognition guidance. Well-presented, organized and moves at a good pace. Thanks!
Anonymous
(Controller)
Excellent recap of the 5 steps of RR and solid examples of their application to learn from. Recommend this course to solidify understanding of concepts.
Anonymous
(Director of Accounting)
Another excellent course by Ms. Fountain on revenue recognition. This should be a required course to have a complete understanding of Topic 606.
Anonymous
(VP of Accounting)
Revenue Recognition (ASC Topic 606): Case Scenarios Part 2 was a good case scenarios to review, some of these were the same as the prior courses
Maya Walker
(Global Controller at Fourth Enterprises)
Really appreciated the part on determining performance obligations related to software with professional services. That was helpful. Thanks!
Anonymous
()
Commercial substance exists if an entity expects the
likelihood, timing or quantity of cash received to
change because of the contract.
Anonymous
(Sr. Accountant)
This course was very informative, and the examples were tough but essential in helping me to learn the fundamentals of this material.
Anonymous
(Executive Director, Corporate Controller)
This is a comprehensive case study for the new revenue recognition standard. It covers each step with easy to understand examples.
Dowton Martin
(Accounting and Finance Consultant at DLC Inc)
Excellent course material and examples. The videos were very informative and educational. I really enjoyed reviewing the material.
Anonymous
()
This is a very interesting course on new revenue recognition standard with many good examples on how to apply the new standard
Anonymous
(Accounting Manager)
This is a good Revenue Recognition course that clearly explains the steps and provides examples that help with understanding.
Abraham Minto
( at Abraham Minto LLC)
Lynn's course on ASC 606 Rev Rec Case Scenarios was very thorough. This session was quite .ong, but had helpful insights.
Anonymous
(Controller)
The case studies really help to see the topic applied. This course is very well prepared to show how to apply each step.
Anonymous
(Revenue Accountant)
This is a good comprehensive course hitting the high points of the 5 steps in ASC 606. Many relevant examples.
Anonymous
(Accountant)
Another good course with plenty of detailed examples and great discussion of how the standard is applied.
Anonymous
()
Great continuation course of Case study 1. Gave more detailed examples and really tested your knowledge.
Anonymous
(Accounting Director)
Great content presentation. This is a great course which provides good information and examples info
Megan Randa
(Senior Staff Accountant at OneLive LLC)
Great course that goes into great detailed examples to help solidify the material being taught
Robert Stellato
( at DS Smith)
This was a good course.. really helped to to the case studies and bring the concepts to light
Anonymous
(Revenue Accountant)
Easy to follow slides and videos. Thanks for another valuable course in revenue recognition!
Anonymous
(Director of Finance)
Very good examples that were helpful to solidify the concepts learned in earlier courses
Anonymous
(Accountant)
Brief examples provided in this course really helped me understand the concepts clearly.
Anonymous
(NA)
Very nice course summarizing the entire Revenue Recognition topic with good examples
Anonymous
(Assistant Controller)
Good course! This course consolidates key points of 5-step along with good examples.
Robert Merii
(CFO at N/A)
very nice overview for the level of Material. Would recommend the case course.
Joe Defelice
(Consultant at Kranz & Associates)
Overall good; examples were helpful
Anonymous
(Consultant)
I was surprised that I still had to check my notes to confirm that answers
Anonymous
(Accounting & Finance Guy)
Well presented with appropriate examples to enhance your understanding.
Anonymous None
(Manager at None)
Another great course with good examples provided. Thorough explanations.
Shane Strong
(Accountant at RH)
Case studies are very helpful for practical application of the standard.
Anonymous
(Corporate Controller)
would have loved more examples especially on how fair value assessment.
Anonymous
(Lead Revenue accountant)
Good and detailed course. Excellent examples with simple explanations.
John Croyle
(CEO at W9manager)
Good overview. I think a more comprehensive summary would be helpful.
Anonymous
()
Good revenue recognition scenario, well structured and presented.
Anonymous
(Associate Director)
This course provided a good overview of Revenue Recognition.
Anonymous
(Senior Accountant)
very helpful examples to help understand the concepts better
Anonymous
(Consultant)
Good exercises and broad coverage of the 5 step model
Anonymous
(accountant)
The materials are well organized with great examples.
Anonymous
(Auditor)
Very good content presented. Great examples noted
Prerequisites
Course Complexity: Intermediate
The course is a second practice case study course for the new five-step revenue recognition model. 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
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Course Questions and Answers(5 Questions)
Lynn FountainCPA, CGMA, CRMA, MBA, Consultant, Author, Trainer
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Hi professor, for exercise 2 (On Jan 1, entity enters a contract to provide monthly computer support for 3 yrs. to a customer - price $400K.), since we've performed $240k of support as of Dec 31 Yr2, and we did receive $200k, why would we recognize $0 instead of $80k of revenue, the portion that wouldn't affect by the client's cash flow issue??
I need to review this one further but wanted to give an initial reply. The question somehow hit my spam so I am just now seeing it.
I will review and verify but to my recollection, in this circumstance if we have concerns with collectibility of the contract amount, the standard says you should record amounts received as a liability until the collection issue is resolved.
I will look at this tonight further. Thanks fir the question
I looked at this further. You have to consider the assumptions in the next slide. Remember, you have to consider whether the discount is implicit and whether there is a potential there could be a significant reversal of revenue. Since the customer is now having financial problems, this becomes a consideration. If you follow through to the third slide it explains that you have to consider the implicit discount so the price is actually 90% of $400K = $360k. We indicated the vendor does not have to reverse revenue already recognized not once they know the company is having financially issues the component of significant reversal comes in. That slide describes what you do in each year. You might re-listen and let me know if this makes sense. It all has to do with the assumptions
On your slide 37, I felt the correct answer is B not C. It is because a customer buys additional five “different” machines (i.e. adding distinct goods) and the contract price increased by amount doesn’t reflect stand alone selling prices of additional goods due to a deep discount. So, it should terminate the original contract and create a new one, right? Thank you!
Yes you are correct. The answer is B. There is a typo. The following slide correctly indicates the answer