This course provides an overview of critical challenges companies encounter under ASC 606, emphasizing several key areas that can be particularly challenging for effective revenue recognition. This includes considerations relating to variable consideration and accounting for contract modifications. This course also addresses the accounting considerations related to significant financing components.

Chapter 1 – Variable Consideration and Significant Financing Components

This chapter explores how to manage variable payments in contracts, such as discounts, rebates, and bonuses, and why accurately estimating these amounts is essential for proper revenue recognition. It also covers ASC 606 guidelines for limiting estimates in cases where payment amounts are uncertain. The chapter also addresses the impact of financing components, explaining how the timing of payments can influence the contract’s overall value and highlighting considerations for industries with long-term projects or delayed payment schedules.

Chapter 2 – Accounting for Contract Modifications

This chapter explores the concept of contract modifications and their impact on revenue recognition under ASC 606. A contract modification occurs when the terms of an existing agreement are changed, affecting the scope, price, or both. It’s important for entities to determine whether these modifications should be treated as a continuation of the existing contract or as a new, separate agreement.

The other Segments of this series ASC 606 Insights are:

  1. ASC 606 Insights: Contract Identification and Performance Obligations (Text Based Course)
  2. ASC 606 Insights: Timing of Revenue Recognition & Principal vs. Agent Considerations (Text Based Course)
  3. ASC 606 Insights: Managing Variable Consideration and Modifications (Text Based Course)
  4. ASC 606 Insights: Licensing Revenue and Financial Statement Disclosures (Text Based Course)

NOTE: There is a 8 CPE Credit Hours combined course also available:
Revenue Recognition - Top Challenges in Applying ASC 606 (Text Based Course)

Learning Objectives
  • Identify different types of variable payments in contracts, including discounts, rebates, and bonuses.
  • Recognize the importance of accurate estimation of variable payments for revenue recognition.
  • Discover and determine appropriate methods for estimating uncertain payment amounts.
  • Explore and distinguish between contracts with and without significant financing components.
  • Recognize factors that impact the time value of money in long-term payment contracts.
  • Identify when a contract modification is treated as a new contract or continuation of an existing one.
  • Recognize when additional goods or services in a modification are distinct.
  • Discover and determine if the price adjustment reflects the standalone selling prices of the new goods or services.
  • Identify and differentiate between contract modifications as separate contracts or part of the existing agreement.
  • Select the appropriate revenue recognition method for a contract modification.
Last updated/reviewed: November 21, 2024
Prerequisites
Course Complexity: Foundational
No advanced preparation or prerequisites are required for this course.
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 .
Instructor for this course
  Course Overview CPE
Course Syllabus
COURSE MATERIAL
  ASC 606 Insights: Managing Variable Consideration and Modifications (Text Based Course)PDF
REVIEW AND TEST
  REVIEW QUESTIONSquiz
 FINAL EXAMexam