Contract LiabilitiesĬommonly referred to as deferred revenue or unearned revenue. When goods or services have been transferred to a customer, but customer payment is contingent based on a future event, this amount is generally referred to as an unbilled receivable. Receivables should be recorded separately from contract assets since only the passage of time is required before consideration is due. A contract asset is an entity’s right to consideration in exchange for goods or services that the entity has transferred to a customer when that right is conditioned on something other than the passage of time (for example, the entity’s future performance). Contract AssetsĬommonly referred to as unbilled receivables or progress payments to be billed. The rights and obligations under the contract may give rise to contract assets and contract liabilities. ASC 606 and related guidance should be referred to for additional information and detail.Ī contract with a customer creates legal rights and obligations. This article, and the related articles, provides a brief overview of the FASB Accounting Standards Codification – Topic 606, Revenue from Contracts with Customers (ASC 606) and omits requirements specific to public entities and many optional disclosures for non-public entities. The purpose of this article is to provide an overview regarding the accounting for and presentation of contract assets and contract liabilities.
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