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This course is a continuation of the discussion of Step One in the (ASC 606) revenue recognition process: Identifying the Contract.  Specifically, this session delves further into the considerations surrounding contract modifications, change orders, unpriced change orders, cancellations, non-finalized changes and accounting treatment when a contract does not exist.

On May 28, 2014, the Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) issued converged guidance on recognizing revenue in contracts with customers.  The objective of the guidance is to establish principles to report useful information to users of financial statements about the nature, amount, timing and uncertainty of revenue from contracts with customers.  The new guidance provides several benefits to financial statement users.  Entities applying the new standard for contract revenue recognition will follow five steps:

  • 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

 

 

The course utilizes many examples from numerous industries to enhance learning of the various concepts.

Learning Objectives

  • Explore the components and requirements around contract modifications.
  • Identify methods to determine contract modification status.
  • Explore accounting considerations for contract modifications.
  • Identify methods to account for unpriced change orders.
  • Explore modifications that fall under the cumulative catch-up accounting rules.
  • Explore accounting for non-finalized contract changes.
  • Explore accounting for contract cancellations.
  • Identify accounting treatment when it is determined a contract does not exist.
  • Explore the concept of contract combinations.
Last updated/reviewed: November 22, 2019

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

43 Reviews (184 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.
5
Member's Profile
I liked that the questions forced me to really think out the different scenarios required in revenue recognition. I appreciate that the new requirements are bringing in contract law rules into the accounting rules. These two can not be separated when deciding how to handle the contract offer, acceptance and consideration.
3
Member's Profile
The examples are good and drive the concepts home. I would appreciate more examples of the same concepts using different industries. Manufacturing and widget sales are a good place to start, but then branch out to other industries like more software, etc.
5
Anonymous Author
This course was a continuation of the previous course "ASC 606 Revenue Recognition Consideration for Identifying the Contract - Part 1". The instructor was very effective in presenting the course materials. The time allotted for the course was sufficient.
5
Member's Profile
This revenue recognition course on considerations for identifying the contract provides a lot of good examples to help understand some of the subtle differences and the various methods of addressing the revenue recognition.
4
Anonymous Author
Thanks for MS. Lynn' great work! I feel safe to attend her CPE courses. But I felt a little confused about the course's content, so can you cite a few more examples to explain the flow charts on the steps!
5
Member's Profile
Lynn provided great examples. The course structure is easy to follow. Really like the fact that there are separate course for each of the 5 steps of the new ruling. I definitely recommend this course.
5
Anonymous Author
Loved this course. The instructor went into details about specific nuances of the guidance and provided more grey type examples than the traditional black and white. Overall, great training.
3
Anonymous Author
Most concepts can only be best expressed through the use of examples. In this case the examples were simplistic and did not explain any more complex possibilities.
5
Member's Profile
Ms. Fountain does it again! Contract modifications are tricky but she makes the topic understandable and clear. Her examples are easy to follow and concise.
4
Anonymous Author
This course was relevant to my job, therefore necessary to pay attention to. Although the topic is dry, the course moves along quickly. Thanks!
5
Anonymous Author
Good course. Stated learning objectives were met. Program materials were relevant and contributed to the achievement of the learning objectives
5
Member's Profile
A good discussion of the intricacies involved in contract modifications - more good examples were included in this session.
4
Member's Profile
I really liked it. I would hope to see more Examples in different industries, like healthcare on contract modifications.
4
Anonymous Author
Very nicely explained concepts and appropriate examples to understand the topic well . Got deep knowledge on the subject
5
Member's Profile
Very in-dept material which was very informative. The examples used were excellent and provided a wealth of information.
4
Member's Profile
This training was easy to understand and the examples were great providing different ways to look at the information.
5
Anonymous Author
I thought the questions were less aligned to the information in the slide deck as they have been in other courses.
4
Anonymous Author
This course is thoughtfully presented and includes various examples that illustrate key concepts in the standard.
4
Member's Profile
I really liked the contract modification decision matrix! That will be a helpful reference to use in the future.
5
Anonymous Author
This was a difficult one. I wish there were more real time examples to make it easier to understand.
5
Anonymous Author
I loved the thorough examples that were included! It helped me learn the material much faster.
4
Anonymous Author
This was an informative and enjoyable course and I plan to take the entire series. Thank you!
5
Member's Profile
This course thoroughly covers a lot of detail on how to account for contract modifications.
5
Member's Profile
Useful course for those who work with revenue and all accounting professionals in general.
5
Anonymous Author
Instructor utilized applicable examples in covering and conveying the course objectives.
5
Anonymous Author
Great course, the slides are clear and concise, the instructor has good examples.
5
Anonymous Author
Great Part 2 which continues from part 1. The instructor is clear and concise.
3
Member's Profile
I like that there are review questions at at the end to test. Good for recall
4
Anonymous Author
The examples are imperative to understanding the application of the standard.
5
Member's Profile
Very informative course. Lots of examples that help with the understanding.
3
Member's Profile
Good overview of these new standards with practical examples. Thank you.
5
Member's Profile
I have enjoyed this series, and am looking forward to the next segment.
5
Member's Profile
Good overview of these new standards with practical examples. Thank you.
5
Member's Profile
Great detail - very helpful for preparing to use the new standard.
5
Member's Profile
Good discussion of the concepts related to contract modifications.
5
Member's Profile
material provided was helpful as the topic is a little confusing
5
Anonymous Author
Great examples were used in the course with realistic scenarios.
5
Member's Profile
Great overview with lots of examples of modifying contracts.
4
Anonymous Author
Very informative with examples that are easy to understand.
4
Anonymous Author
This course provided a good overview of ASC 606 Step 2.
4
Member's Profile
The examples were very helpful in this complex area
4
Member's Profile
great course in the series of accouting for revenue

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 .

5 QuestionsCourse Questions and Answers

User picture

In the exam question about the customer agreeing to the necessary security patch prior to the specialized software install, I followed the example in the lesson too closely and thought we needed to know if the price eventually charged was deemed reasonable. Were we supposed to assume that? I’m sure the requirement of this type of patch is completely standard practice but did think we needed more information. Therefore I think perhaps that should be highlighted in the lesson.

Member's Profile

What did you select as the answer. In this case, the patch is needed and even though they have not agreed to a price, the customer has agreed to the patch prior to installation. So the modification is approved.

Member's Profile
User picture

Hi Lynn, thanks for responding so quickly!

To the question, "Assume a software contractor enters into an agreement with a customer to install a specialized software. Prior to beginning the project, the contractor identifies some information technology security issues that must be patched prior to installing the software. The customer agrees to the work however, the costs have not yet been agreed to. Is the contract modification approved such that the contractor can account for it?" ...

... I chose the answer, "Depends on the circumstances" because although the customer agreed I did still think that it wasn't considered approved unless we knew that the price charged was deemed reasonable (even if I assumed that the invoicing and procedures were in-line with customary business practices).

Thanks again!

Member's Profile

I can understand what you may have been thinking. In this case though, the patch is needed and the modification was approved so the modification is agreed to

Course Syllabus
INTRODUCTION AND OVERVIEW
  2:12Introduction to Revenue Rec: Considerations for Identifying the Contract – Part 2
  6:31Contract Modifications
  6:53Determination of Modification Status
  8:39Accounting Considerations
  10:31Example 2
  3:55Example: Unpriced Change Order
  9:05Example Modifications: Cumulative Catch Up
  1:28Non-Finalized Changes
  2:30Cancellation Rights
  5:40Accounting When No Contract Exists and Examples
  4:42More Examples
  1:52Summary
CONTINUOUS PLAY
  1:03:56Revenue Rec: Considerations for Identifying the Contract – Part 2
SUPPORTING MATERIALS
  PDFSlides: Revenue Rec: Considerations for Identifying the Contract – Part 2
  PDFRevenue Rec: Considerations for Identifying the Contract – Part 2 Glossary/Index
REVIEW AND TEST
  quizREVIEW QUESTIONS
 examFINAL EXAM