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
- Revenue Recognition:Considerations for Identifying the Contract - Part Two
- Revenue Recognition: Considerations for Performance Obligations – Part One
- Revenue Recognition: Considerations for Performance Obligations – Part Two
- Revenue Recognition: Determine the Transaction Price Part One
This segment is designed to further evaluate Step Three of the new model dealing with determining the transaction price. The 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. Determining transaction price requires election of policies and significant use of judgment.
The new revenue recognition standard provides guidance on specific types of consideration. This is the second part in a two-part segment that will evaluate the various concepts involved in determining the contract price.
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.
NOTE: The revenue recognition courses and the certificate are fully accurate and up-to-date per the standard. In a few places, Covid examples were used however the example does not impact the accuracy of the course. Although COVID continues to be an issue in many areas, similar events can be related to other examples that may occur in today’s economy. These are just examples and something to consider in the event of future economic issues that may occur that would be impactful to the company in the same manner.
Learning Objectives
- Explore how rights of return impact transaction price.
- Identify how refund liabilities should be handled.
- Explore examples related to rights of return and refund liabilities.
- Explore how provisions that include a significant financing component impact transaction price.
- Explore examples of significant financing components.
- Explore how consideration payable to a customer impacts transaction price.
- Explore examples on consideration payable to a customer.
- Explore how sales based or usage royalties impact transaction price.
- Explore examples of sales based and usage royalties.
Included In Certifications
This course is included in the following Certification Programs:
16 CoursesRevenue Recognition (ASC 606) 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): Disclosure Requirements “Contracts with Customers”
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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.
Education Provider Information
Course Questions and Answers(3 Questions)

On your slide page 20 (PDF file), the journal entry #2, may I know why the ROR Asset is $10 instead of $5 (2 x $2.5) and the COGS is $40 instead of $45 (18 x $2.5)? Thank you!
Wanted you to know I saw your question. I am currently traveling and will be able to look at slides tomorrow
Remember, the ROR asset is not valued cost. It is valued at the selling price. The problem said there were 10% potent; returns. Sales were $100 so ROR asset is $10. You also have to credit inventory for the full $2.50 * 20 ($50) because the item has been taken out of inventory and sold. You recorded the potential refund liability in entry 1.