Contract with a customer

A signature is evidence, not the whole accounting conclusion. Identify the parties, promised exchange, enforceable rights, payment terms, termination clauses, commercial substance, and whether collecting the consideration to which the entity expects to be entitled is probable under the applicable model. A party purchasing outputs of the entity's ordinary activities may be a customer; a collaborator sharing risks and benefits of developing an activity may require a different scope analysis.

When the criteria are not met, cash receipt does not automatically become revenue. Preserve the received amount, remaining obligations, termination and refund conditions, and the facts that would move the arrangement into or out of the model. Contract combination is a separate unit-of-account question.

The five entry criteria are in ASC 606-10-25-1. Approval may be written, oral, or based on customary business practices, but the parties must be committed to perform. Enforceability depends on law and the relevant contract practices under 25-2. An entity continues to assess a failed contract under 25-6.

Consideration received before the criteria are met is generally a liability until the criteria are later met or a revenue event in 25-7 occurs. The liability represents an obligation to transfer goods or services or refund the customer; 25-8 measures it at the amount received.

Follow the Cedar contract-boundary example, then prepare the independent Summit memo.