1.5 CPE 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.
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 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: March 10, 2024
Included In Certifications
This course is included in the following Certification Programs:
17 CoursesRevenue Recignition (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) COVID Implications
- Revenue Recognition (ASC Topic 606): Disclosure Requirements “Contracts with Customers”
100 Reviews (404 ratings)
Reviews
Lawrence Hirsch
(Controller at Builders design)
This part 2 wrapped up contract issues that can arise. The ASC606 is a complicated regulation and Lynn does a great job of comprehensively reviewing, explaining and casing the points to be highlighted. There are six courses in the series and this is my 4th. GREAT analysis of ASC606. I am getting up to snuff on 606 :).
Thank you Lynn,
Larry
Anonymous
(Vice President of Technical Accounting)
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.
Jay Bineau
( at Seigler & Tweedlie)
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.
Anonymous
(CPA)
Very interesting discussion of the detailed examination of proper accounting treatment of revenue under the new revenue recognition standard when there are changes/modifications made to a contract. Appreciated the many examples used throughout the course to illustrate how to apply the new rules in practice.
Alvin Scott
(Revenue Operations Analyst at SurveyMonkey)
I enjoyed this course and feel that I benefited from the entire overview. There wasn't as much repetition in this course as there is in the other course. All concepts were very clear and even the final exam forced me to think through most of the questions and not just memorize.
Chere Bramer
(Consultant at CLBM Consulting, LLC)
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.
Anonymous
(Senior Internal Auditor)
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.
Anonymous
(Assistant Controller)
Great course! Using a lot of examples to explain contract modification. I like one of the slides adapted from a slide by KPMG. It helps you determine whether modification should be separate, modification of the original contract, etc.
Anonymous
(Revenue Accountant)
Overall, a great course, very informative with multiple examples, which were very helpful.
A few of the images in the slides had watermarks on them, which bothers me when people use images without permission/paying for them...
Mary Behnen
( at Jamul Casino)
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.
Anonymous
(Audit Manager)
Gained more understanding on the contract modification although it really is confusing, the trainer provided examples to help us understand more on the concept. Appreciate if we have specific courses/examples for NPOs.
Anonymous
(Revenue Assurance Manager)
I enjoyed the course and have learned a lot from both part 1 and 2. Contract modification being the most complicated concept in part 2, I really appreciated the flow chart/decision tree and will refer back to it often
Anonymous
(Risk manager)
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!
Lilian Dendrinos
(consultant at DLC Group)
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.
Angelica Altamira
(SR Rev Accountant at na)
it is a great part 2 for contract modification. Lynn referred me to some links for more examples to answer my questions. Thanks, Lynn, great material for BDO. I watched the course twice though. : )
Anonymous
(Director of Accounting)
A lot of helpful information on when a contract modification should be a standalone, combined, or terminated with a new contract creation. Along with the accounting entries for these situations.
Anonymous
(Associate Director)
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.
Joshua Bourquard
(Accounting Manager Financial Reporting a.. at TPx Communications)
Overall a great lecture with plenty of examples including how to record a liability if not recognized. Enjoyed how the course was broken down into smaller parts with plenty of discussion.
ingela shannahan
(Financial Analyst at Pega Systems)
this course was an interesting topic. it would've been helpful if the chart was clearer. seems like the chart will be very helpful to keep as a reference. i'm excited to learn whats next
Anonymous
(Director of Accounting)
This part 2 on contract modifications shows clearly how complicated the new revenue recognition pronouncement when it comes to modifications to an existing contract.
Anonymous
(Sr. Director of Cost Management and Comp..)
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.
Linda Forde
(Owner at The Forde Firm, LLC)
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.
Anonymous
()
Extremely informative guide into understanding step 1 of the 5 step revenue process, which dives into contract modifications in detail. Highly recommend.
Anonymous
(Revenue Accountant)
This course was relevant to my job, therefore necessary to pay attention to. Although the topic is dry, the course moves along quickly. Thanks!
Anonymous
(solo)
Good course. Stated learning objectives were met. Program materials were relevant and contributed to the achievement of the learning objectives
Liubov Barrington
(cpa at self-employed)
A lot to know about ACS606. Detailed lecture re: modification of the contract in this newer standard. Lynn is one of the best instructors here.
Anonymous
(Executive Director, Corporate Controller)
A good summary course for identifying the contract modifications under ASC 606. The examples provided are relevant and easy to understand.
Anonymous
(Sr. Accounting Manager)
I liked the class because it had several examples and different case scenarios that helped drive the subject home. Really informative.
Joe Isaacs
(Unemployed at N/A)
Ms. Fountain has taken some of the more detailed items regarding ASC 606 and described them well and made them easy to understand.
Anonymous
(System Director, Net Revenue)
Well presented course with good examples. Good discussion of different types of modifications and how to account for them.
Robyn Ortolano
(Corporate Accounting Manager at DataPath, Inc.)
Good instructor. I like that she has divided the new revenue recognition standards into multiple courses. Very thorough course.
Anonymous
(Finance Director)
The course has good examples. However, there is a lot of information communicated verbally that is not captured in the slides.
Anonymous
(Controller)
Use of examples by instructor make the material much easier to follow, and understand how it applies to everyday situations.
Anonymous
(Sys Ops Manager)
Great course with really practical examples to use as part of contract consideration and combination accounting assessment.
Ann Marotta
(Consultant at DLC Group)
A good discussion of the intricacies involved in contract modifications - more good examples were included in this session.
GARETT JOHNSON
(Sr. Revenue Accountant at Genoa healthcare)
I really liked it. I would hope to see more Examples in different industries, like healthcare on contract modifications.
Anonymous
(NA)
Very nicely explained concepts and appropriate examples to understand the topic well . Got deep knowledge on the subject
Dowton Martin
(Accounting and Finance Consultant at DLC Inc)
Very in-dept material which was very informative. The examples used were excellent and provided a wealth of information.
Derek Ettinger
( at GP Fund Solutions, LLC)
Lynn is a good instructor, and this was a good course, but I found it less well-organized than others she has produced.
Wendy Cox
(Inventory Accounting Manager at Harry and David)
This training was easy to understand and the examples were great providing different ways to look at the information.
Anonymous
(SOX Compliance Manager)
I thought the questions were less aligned to the information in the slide deck as they have been in other courses.
Anonymous
(VP of Accounting)
Very good course, many thanks to Lynn.
This course got into more detail, I like the modification chart the most
Weber Jodesty
(Director of Accounting at Cortland)
Great detailed class. I'm able to absorb this information clearly and it's being delivered with plenty of detail.
Anonymous
(Revenue Accountant)
This course provided great examples to reinforce the accounting guidance, especially for Contract Modifications.
Anonymous
(-)
This course is thoughtfully presented and includes various examples that illustrate key concepts in the standard.
Anonymous
()
It was helpful walking through examples and the thought processes behind how the contract should be accounted for
Michael Mascitto
(NetSuite Consultant at Anchor Group LLC)
I really liked the contract modification decision matrix! That will be a helpful reference to use in the future.
Anonymous
(Accountant)
This course was again very clearly explained to understand various considerations for identifying the contract.
Anonymous
(Accounting Manager)
The slides and examples are relevant to the teaching and help in making the materials easier to understand
Anonymous
(Senior Accounting Coordinator)
There are so many rules and regulations to follow for when to use a modified contract or a new contract.
Anonymous
()
Great examples, started to get a little tricky, so appreciated the distinct differences in the examples.
Anonymous
(Lead Revenue accountant)
This was a difficult one. I wish there were more real time examples to make it easier to understand.
Jacinth Vidinha
(Controller at Madden Media)
Mandatory reviews with character limits should not be required in order to download the certificate.
Anonymous
(CFO)
The course was well organized and the instructor is very clear and organized. I would recommend.
Anonymous
(Sr. Accountant)
I loved the thorough examples that were included! It helped me learn the material much faster.
Anonymous
(finance controller /Director)
There're several steps and method for modofication of revenue eecognotion or revenue contracts.
Anonymous
()
This was an informative and enjoyable course and I plan to take the entire series. Thank you!
Sharon King
(Contractor at Self employed)
This course thoroughly covers a lot of detail on how to account for contract modifications.
Anonymous
(GL Accountant)
The examples provided were detailed and explained well. I was able to follow along easily.
Halina Kovel
(Sr Revenue Accountant at Yelp)
Useful course for those who work with revenue and all accounting professionals in general.
Megan Randa
(Senior Staff Accountant at OneLive LLC)
Goes in-depth and provides helpful examples to help solidify understanding of the guidance
Anonymous
(Chief Financial Officer)
Instructor utilized applicable examples in covering and conveying the course objectives.
Anonymous
(Sr. Manager, Revenue Recognition)
This is a good presentation of the relevant information. The slides are very helpful.
Nilufer Shaikh
( at AccessHope)
Really helpful in understanding contracts and modifications as they relate to ASC 606
Anonymous
(Accounting Bookkeeper)
Slides are good. Examples are greatly appreciated to understand the complex concepts
Anonymous
(CFO)
Includes a lot of scenarios which apply to contract modifications. Very good depth.
Anonymous
(Senior FP&A Operations Manager)
Great course, the slides are clear and concise, the instructor has good examples.
Anonymous
(Corporate)
Course is really informative and questions are direct to what has been explained.
Anonymous
(Director of Finance)
This course was not as easy to follow as others, information was a little vague.
Anonymous
(Consultant)
Great Part 2 which continues from part 1. The instructor is clear and concise.
Anonymous
(VP, Finance)
Great course for technical accounting knowledge with good variety of examples.
Anonymous
(Construction Assistant Controller)
The course is helpful with everything clearly outlined. It's easy to follow.
Olyli Bantuas
(Revenue Consultant at DeWinter Consulting)
I like that there are review questions at at the end to test. Good for recall
Anonymous
(Self)
The examples are imperative to understanding the application of the standard.
Anonymous
(Contoller)
This instructor purchases clear, understandable slides and relevant examples
Inna Shmukler
(Controller at Fornetix LLC)
Very informative course. Lots of examples that help with the understanding.
Anonymous
(Consultant)
well crafted examples they really helped with the learning for this module
Sam Bakhshalian
(VP Finance at Aspire Food Group)
The great examples illustrated the points brought up and were very helpful
Dane Fuhrman
(- at ---)
Good overview of these new standards with practical examples. Thank you.
Anonymous
(accountant)
There are great examples listed in the course with detailed explanations.
Bryan Chamberlain
(Controller at N/A)
I have enjoyed this series, and am looking forward to the next segment.
Sergiy Korytko
(Revenue Manager at Instacart)
Good overview of these new standards with practical examples. Thank you.
Anonymous
()
I explore the components and requirements around contract modifications.
Anonymous
(Accountant)
Very good session with detailed examples to better understand step 1
Emily Moran
(Director of Finance at Kurtosys Systems)
Great detail - very helpful for preparing to use the new standard.
Dawson LaCasse
(Director - Corporate Accounting at MTD Products Inc)
Good discussion of the concepts related to contract modifications.
Joanne Mullins
( at Trimble)
Examples were very helpful. The flow chart was also very helpful.
Doaa Ghali
(Sr Revenue Analyst at Tesla)
material provided was helpful as the topic is a little confusing
Anonymous
()
Great examples were used in the course with realistic scenarios.
Anonymous
(Senior Accountant)
Excellent info and great examples to help apply the information.
Anonymous
()
Good course, especially for novices in the contracting arena.
Chris Grimes
(Rules Master at Cisco)
Great overview with lots of examples of modifying contracts.
Anonymous
(Manager)
Very informative with examples that are easy to understand.
Anonymous
(CFO)
Very good examples in this topic. Wish additional for SaaS.
Anonymous
()
Very good course. I don't have much to comment on anymore.
Anonymous
(Sr. Revenue Accountant)
Provided more examples to walk through specific scenarios.
Anonymous
(Associate Director)
This course provided a good overview of ASC 606 Step 2.
Anonymous
(Director)
This is a great topic and relevant for all entities.
Angela Duncan
(Consultant at DLC Group)
The examples were very helpful in this complex area
Victor Fuentes
(Manager at RSM)
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
.
Course Questions and Answers(5 Questions)
Lynn FountainCPA, CGMA, CRMA, MBA, cPIA, Consultant, Author, Trainer
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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.
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.
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!
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