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ACC 300 · Meeting 8 · Thu 9/24

Apply the revenue model

59 slides · Unit 2 · Optional Kieso: Chapter 3 and Chapter 17 · Meeting overview

Lecture

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  1. Slide 1. Apply the revenue model
  2. Slide 2. Why is revenue hard to get right?
  3. Slide 3. Revenue decisions for one customer contract
  4. Slide 4. Revenue follows promised performance
  5. Slide 5. Today's class
  6. Slide 6. ASC 606 revenue recognition model
  7. Slide 7. Identify a qualifying contract
  8. Slide 8. Does the arrangement qualify?
  9. Slide 9. A customer contract must meet five criteria
  10. Slide 10. When the arrangement does not qualify
  11. Slide 11. Does this agreement qualify?
  12. Slide 12. Why the Granite Harbor agreement qualifies
  13. Slide 13. Identify performance obligations
  14. Slide 14. The two-part distinct test
  15. Slide 15. Which fact fails the second distinct test?
  16. Slide 16. Integration fails the second test
  17. Slide 17. Series rule: repeated services = one obligation
  18. Slide 18. What has Granite Harbor promised?
  19. Slide 19. Classify Granite Harbor's promises
  20. Slide 20. Granite Harbor's promised goods and services
  21. Slide 21. Integration can change the obligation map
  22. Slide 22. Determine the transaction price
  23. Slide 23. One transaction price covers the contract
  24. Slide 24. Two methods estimate variable consideration
  25. Slide 25. Which method fits a two-outcome bonus?
  26. Slide 26. The most likely amount fits two outcomes
  27. Slide 27. Estimate the amount, then test reversal risk
  28. Slide 28. Transaction price practice
  29. Slide 29. Granite Harbor transaction price
  30. Slide 30. Which fact supports a zero constraint?
  31. Slide 31. Outside control raises reversal risk
  32. Slide 32. Payment timing may contain financing
  33. Slide 33. Allocate the transaction price
  34. Slide 34. Step 4 divides one contract price
  35. Slide 35. Xerox shows why allocation matters
  36. Slide 36. Allocate by relative standalone selling prices
  37. Slide 37. Rebuild the allocation
  38. Slide 38. The allocations total $132,000
  39. Slide 39. Recognize revenue
  40. Slide 40. Recognition timing for each performance obligation
  41. Slide 41. Three criteria lead to over-time recognition
  42. Slide 42. Cost-to-cost measures progress
  43. Slide 43. Keweenaw Systems uses cost-to-cost
  44. Slide 44. Point-in-time recognition applies otherwise
  45. Slide 45. Which consulting fact supports revenue over time?
  46. Slide 46. Weekly advice transfers as work occurs
  47. Slide 47. Granite Harbor timing example
  48. Slide 48. Granite Harbor recognition
  49. Slide 49. Billing and cash create separate balances
  50. Slide 50. What remains when billing moves ahead?
  51. Slide 51. Billing leads performance, while cash trails billing
  52. Slide 52. Exam 1 is Tuesday, September 29
  53. Slide 53. Permitted exam materials
  54. Slide 54. Any exam questions?
  55. Slide 55. A deposit before a qualifying contract
  56. Slide 56. The deposit remains a liability
  57. Slide 57. Measure progress and reconcile billing
  58. Slide 58. Performance exceeds billing by $60,000
  59. Slide 59. Exam 1: Units 1 and 2

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Contents

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Opening and the five-step model Slides 1–6

  1. 1 Apply the revenue model
  2. 2 Why is revenue hard to get right?
  3. 3 Revenue decisions for one customer contract
  4. 4 Revenue follows promised performance
  5. 5 Today's class
  6. 6 ASC 606 revenue recognition model

Step 1: identify a qualifying contract Slides 7–12

  1. 7 Identify a qualifying contract
  2. 8 Does the arrangement qualify?
  3. 9 A customer contract must meet five criteria
  4. 10 When the arrangement does not qualify
  5. 11 Does this agreement qualify?
  6. 12 Why the Granite Harbor agreement qualifies

Step 2: identify performance obligations Slides 13–21

  1. 13 Identify performance obligations
  2. 14 The two-part distinct test
  3. 15 Which fact fails the second distinct test?
  4. 16 Integration fails the second test
  5. 17 Series rule: repeated services = one obligation
  6. 18 What has Granite Harbor promised?
  7. 19 Classify Granite Harbor's promises
  8. 20 Granite Harbor's promised goods and services
  9. 21 Integration can change the obligation map

Step 3: determine the transaction price Slides 22–32

  1. 22 Determine the transaction price
  2. 23 One transaction price covers the contract
  3. 24 Two methods estimate variable consideration
  4. 25 Which method fits a two-outcome bonus?
  5. 26 The most likely amount fits two outcomes
  6. 27 Estimate the amount, then test reversal risk
  7. 28 Transaction price practice
  8. 29 Granite Harbor transaction price
  9. 30 Which fact supports a zero constraint?
  10. 31 Outside control raises reversal risk
  11. 32 Payment timing may contain financing

Step 4: allocate the transaction price Slides 33–38

  1. 33 Allocate the transaction price
  2. 34 Step 4 divides one contract price
  3. 35 Xerox shows why allocation matters
  4. 36 Allocate by relative standalone selling prices
  5. 37 Rebuild the allocation
  6. 38 The allocations total $132,000

Step 5: recognize revenue Slides 39–48

  1. 39 Recognize revenue
  2. 40 Recognition timing for each performance obligation
  3. 41 Three criteria lead to over-time recognition
  4. 42 Cost-to-cost measures progress
  5. 43 Keweenaw Systems uses cost-to-cost
  6. 44 Point-in-time recognition applies otherwise
  7. 45 Which consulting fact supports revenue over time?
  8. 46 Weekly advice transfers as work occurs
  9. 47 Granite Harbor timing example
  10. 48 Granite Harbor recognition

Contract balances Slides 49–51

  1. 49 Billing and cash create separate balances
  2. 50 What remains when billing moves ahead?
  3. 51 Billing leads performance, while cash trails billing

Exam 1 logistics Slides 52–54

  1. 52 Exam 1 is Tuesday, September 29
  2. 53 Permitted exam materials
  3. 54 Any exam questions?

Bonus practice Slides 55–58

  1. 55 A deposit before a qualifying contract
  2. 56 The deposit remains a liability
  3. 57 Measure progress and reconcile billing
  4. 58 Performance exceeds billing by $60,000

Next meeting Slides 59–59

  1. 59 Exam 1: Units 1 and 2