Instructor for this course
more

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. 

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 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: May 24, 2022

Included In Certifications

This course is included in the following Certification Programs:

16 CoursesRevenue Recognition Certification

  1. Revenue Recognition (ASC Topic 606) Standard Overview
  2. Revenue Recognition (ASC Topic 606): Identify The Contract Part 1
  3. Revenue Recognition (ASC Topic 606): Identify The Contract Part 2
  4. Revenue Recognition (ASC Topic 606): Performance Obligations Part 1
  5. Revenue Recognition (ASC Topic 606): Performance Obligations Part 2
  6. Revenue Recognition (ASC Topic 606): Transaction Price Part 1
  7. Revenue Recognition (ASC Topic 606): Transaction Price Part 2
  8. Revenue Recognition (ASC Topic 606): Allocating Transaction Price
  9. Revenue Recognition (ASC Topic 606): Recognize Revenue
  10. Revenue Recognition (ASC Topic 606): Scenarios For Identify The Contract
  11. Revenue Recognition (ASC Topic 606): Scenarios For Performance Obligations
  12. Revenue Recognition (ASC Topic 606): Scenarios For Transaction Price
  13. Revenue Recognition (ASC Topic 606): Scenarios For Transaction Price And Recognize Revenue
  14. Revenue Recognition (ASC Topic 606): Case Scenarios Part 1
  15. Revenue Recognition (ASC Topic 606): Case Scenarios Part 2
  16. Revenue Recognition (ASC Topic 606) COVID Implications

44 Reviews (225 ratings)Reviews

5
Member's Profile
I liked this course, but felt the heavy focus on ASC 605 vs ASC 606 wasn't as relevant for me specifically because I don't have any experience with the old standard. It's definitely good to know the differences of course. Outside of that I think this course was great. I feel my understanding of variable consideration is getting much stronger.
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
Member's Profile
Very thorough class with plenty of examples to drive home each principle which also made understand each allocation estimation method approach. What made it even better were the comparisons to ASC 605 to make ASC 606 more understandable in relations to the old standard.
5
Anonymous Author
Comprehensive review of methods used under new revenue recognition standard to allocate the transaction price to various performance obligations. Lots of easy to follow examples are used to illustrate the practical application of the rules.
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.
4
Member's Profile
After listening to the course, I still was a little counfused with the contents and could not tell the big differenced between the 605/606 and some other concepts, Maybe more examples could be helpful!!!
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 course is really necessary to understand step 4 of the new revenue recognition rule under ASC 606 and Ms. Fountain does a great job in providing examples to clarify the standard.
4
Member's Profile
Excellent coverage of part 4 of the revenue recognition process. This course effectively covers a broad spectrum of issues associated with allocation of the transaction price.
5
Anonymous Author
This is a great overview of the step 4 (Allocating Transaction Price). I like the section of comparison to ASC605 as you can learn what is the change in the new standard.
3
Anonymous Author
I liked the section and thought that the review questions were good to help challenge myself and ensure I know the knowledge and all that ins and outs of each scenario
5
Member's Profile
Solid course that provides a detailed overview of Step 4 in the new revenue recognition process. If you need to know this material, this course will suit your needs.
5
Anonymous Author
The course explains the fourth step in the new revenue recognition standard - allocating the transaction price to performance obligations. Very good course
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
Very good course overall. Examples really helped with understanding all major concepts. It might have been even better if examples were not that simple.
4
Anonymous Author
I enjoy the style of this instructor. The slides are useful and a good reference point to refer back to when needed for a simple language definition.
5
Anonymous Author
Excellent description of the proper application of 606 to allocation to Performance Obligations. Solid use of examples to make application practical.
5
Anonymous Author
Good overview of revenue recognition as it applies to Transaction pricing as well as the major changes from ASC 605 and 606 recognition principals.
4
Anonymous Author
Course was very thorough. A comprehensive review of methods under the new standard ASC 606, in comparison to some of the old ones (ASC 605).
5
Member's Profile
This course has easy to understand course materials and a lot of good examples to illustrate the concept of allocation of transaction price.
5
Member's Profile
Another really good course on ASC606 steps. This has been extremely helpful. The examples help tremendously to reinforce concepts.
5
Member's Profile
Allocating the price to the performance obligation was not as diffucult as one assumes if you flollow the step by step analysis
4
Member's Profile
Very good course.. Lots of really good examples that were easy to follow and dealt well with the complexities of the standard.
5
Member's Profile
Very helpful course. It gave me a lot of ideas on how I can think about our SSP analysis and discount practices.
5
Anonymous Author
this was tougher than I thought, the use of multiple combinations in the answers made this the toughest section
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.
4
Anonymous Author
Very good look at the various methods for allocating revenue, and the differences from the old standard.
4
Anonymous Author
Examples used could have been more practical. It was a little confusing. However understood the concepts.
5
Anonymous Author
What you would expect for a foundation level course. The questions proved to be a nice refresher.
4
Anonymous Author
Very nicely explained concepts and appropriate examples for better understanding of the subject.
5
Member's Profile
The examples were very helpful and allowed me to get a firm grasp of the material. Thank you!
5
Anonymous Author
The revenue recognition series of videos is excellent and I recommend them all. Thank you!
5
Member's Profile
Good overview of hwo to allocate transaction price based on performance obligations.
4
Anonymous Author
Good examples that represent all of the different possible methods that can be used.
4
Anonymous Author
Pretty good overview for the level of course provided. I would take again.
4
Member's Profile
Good overview, with pretty good examples
4
Anonymous Author
Thank you for the coverage of Allocations! This course is very helpful.
5
Anonymous Author
topics were covered thoroughly with great examples to apply info to
4
Member's Profile
great course for financial reporting and accounting professionals
4
Anonymous Author
This course provided a good overview of revenue recognition.
4
Anonymous Author
Very thorough. Instructor dives deep into various examples.
5
Anonymous Author
Excellent course and practical examples. Very helpful!
5
Anonymous Author
Excellent practical course --well organized and clear

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
  9:55Allocate
  7:12Adjusted Market Assessment
  8:20Example Two Adjusted Market
  5:04Allocating Variable Consideration Using Adjusted Market
  10:56Expected Cost Plus a Margin
  8:33Residual Approach
  7:30Example Determining Whether Residual Approach Can Be Used
  8:34How to Allocate
  3:15Comparison to ASC 605
  8:13Variable Consideration
  9:56Example Variable Consideration Allocated on Basis of SSP
CONCLUSION
  2:17Summary
CONTINUOUS PLAY
  1:32:10Revenue Rec: Allocating transaction price to performance obligations
SUPPORTING MATERIALS
  PDFSlides: Revenue Rec: Allocating transaction price to performance obligations
  PDFAppendix – Transaction Price in a Contract
  PDFAppendix – Significant Financing Component
  PDFRevenue Rec: Allocating transaction price to performance obligations Glossary/Index
REVIEW AND TEST
  quizREVIEW QUESTIONS
 examFINAL EXAM