
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.
Included In Certifications
This course is included in the following Certification Programs:
16 CoursesRevenue Recognition Certification
- Revenue Recognition Standard Overview
- Revenue Recognition: Identify The Contract Part 1
- Revenue Recognition: Identify The Contract Part 2
- Revenue Recognition: Performance Obligations Part 1
- Revenue Recognition: Performance Obligations Part 2
- Revenue Recognition: Transaction Price Part 1
- Revenue Recognition: Transaction Price Part 2
- Revenue Recognition: Allocating Transaction Price
- Revenue Recognition: Recognize Revenue
- Revenue Recognition: Scenarios For Identify The Contract
- Revenue Recognition: Scenarios For Performance Obligations
- Revenue Recognition: Scenarios For Transaction Price
- Revenue Recognition: Scenarios For Transaction Price And Recognize Revenue
- Revenue Recognition: Case Scenarios Part 1
- Revenue Recognition: Case Scenarios Part 2
- Revenue Recognition COVID Implications
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Prerequisites
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.