# ASC 606-10: Revenue from Contracts with Customers — Overall Source: FASB Accounting Standards Codification, Basic View [Read online](https://asc.understandingaccounting.org/asc/606/10/) Study and research edition. Verify current requirements with the official source. Summaries, enrichment, and tags are machine-generated study aids. Paragraph html preserves source markup; snippet is abbreviated. Pending content is not necessarily effective. Tables and mathematical or amendment markup are retained as HTML where Markdown would lose structure. Source downloaded (UTC): 2026-09-09T23:17:50.449Z to 2026-09-09T23:18:32.707Z Record version: sha256:08bc3b2f2d417b3bd687ec8d868533f565a8dd288b6fd8c67d27d0806489827a Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 606-10: Revenue from Contracts with Customers — Overall ### Machine-generated study aids ```json { "summary": "ASC 606-10 is the general revenue recognition model for contracts with customers: revenue is recognized to depict the transfer of promised goods or services in an amount reflecting the consideration to which the entity expects to be entitled. It is applied through five steps — identify the contract, identify the performance obligations, determine the transaction price, allocate that price to the performance obligations, and recognize revenue as each obligation is satisfied when the customer obtains control (606-10-05-4). It also sets the scope exclusions (leases, insurance, financial instruments, guarantees, certain nonmonetary exchanges), balance sheet presentation of contract assets/liabilities and receivables, and a broad disclosure package.", "key_points": [ "A contract is accounted for under Topic 606 only when all five criteria in 606-10-25-1 are met: approval and commitment, identifiable rights, identifiable payment terms, commercial substance, and probable collection of substantially all consideration for the goods or services that will be transferred; if not met, consideration received is a liability until one of the events in 606-10-25-7 occurs.", "A promised good or service is a performance obligation if it is distinct — the customer can benefit from it on its own or with readily available resources and the promise is separately identifiable within the context of the contract (606-10-25-19); integration services, significant customization, and high interdependence indicate promises are not separately identifiable (606-10-25-21).", "Contracts entered into at or near the same time with the same customer must be combined when any criterion in 606-10-25-9 is met; a modification is a separate contract only if it adds distinct goods or services priced at standalone selling price (606-10-25-12), otherwise it is treated as a termination and new contract or as a cumulative catch-up adjustment (606-10-25-13).", "Revenue is recognized when (or as) the customer obtains control — the ability to direct the use of and obtain substantially all the remaining benefits from the asset (606-10-25-23 through 25-25).", "A performance obligation is satisfied over time if any of the three criteria in 606-10-25-27 is met (simultaneous receipt and consumption; customer controls the asset as created; no alternative use plus enforceable right to payment for performance completed to date); otherwise it is satisfied at a point in time using the control indicators in 606-10-25-30.", "For over-time obligations an entity applies a single output or input method consistently, remeasures progress each period as a change in estimate, and if progress cannot be reasonably measured recognizes revenue only up to costs incurred (606-10-25-31 through 25-37).", "Once either party performs, the contract is presented as a contract asset or contract liability, with unconditional rights to consideration presented separately as a receivable (606-10-45-1 through 45-4); contract assets and receivables are assessed for credit losses under Subtopic 326-20." ], "categories": [ "Revenue", "Recognition", "Presentation", "Disclosure" ], "audience_level": "intermediate", "student_note": "This is the backbone of modern revenue recognition and shows up constantly on the FAR exam; the most common mistakes are treating every deliverable in a contract as a separate performance obligation (ignoring the 'separately identifiable within the context of the contract' prong) and confusing physical delivery or legal title with transfer of control.", "related_topics": [ "340-40", "842", "606-10-32", "958-605", "952-606", "326-20" ], "key_concepts": [ "five-step revenue model", "performance obligation", "distinct good or service", "transfer of control", "transaction price", "contract asset and contract liability", "contract modification", "measure of progress" ] } ``` Source downloaded (UTC): 2026-09-09T23:17:50.449Z to 2026-09-09T23:17:50.449Z Record version: sha256:6a2cc61dd58eacd20a51862e0975f1bfba4104218990d8d2c0c34a4d571e0332 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 606-10-00: 00 Status [Read section](https://asc.understandingaccounting.org/asc/606/10/#00-status) SEC content: no ##### [606-10-00-1](https://asc.understandingaccounting.org/asc/606/10/#606-10-00-1) Pending content: no Source downloaded (UTC): 2026-09-09T23:17:50.449Z to 2026-09-09T23:17:50.449Z Record version: sha256:8a29c5b99220597143a1fdaf8449a5d2d5648276ed7825fe9b1043d9cd790f0d Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The following table identifies the changes made to this Subtopic.
ParagraphActionAccounting Standards UpdateDate
AwardAddedAccounting Standards Update No. 2019-0811/11/2019
ContractAddedAccounting Standards Update No. 2014-0905/28/2014
Contract AssetAddedAccounting Standards Update No. 2014-0905/28/2014
Contract LiabilityAddedAccounting Standards Update No. 2014-0905/28/2014
CustomerAddedAccounting Standards Update No. 2014-0905/28/2014
Grant DateAddedAccounting Standards Update No. 2019-0811/11/2019
LeaseAddedAccounting Standards Update No. 2016-0202/25/2016
Not-for-Profit EntityAddedAccounting Standards Update No. 2014-0905/28/2014
Performance ConditionAmendedAccounting Standards Update No. 2025-0405/15/2025
Performance ConditionAddedAccounting Standards Update No. 2019-0811/11/2019
Performance ObligationAddedAccounting Standards Update No. 2014-0905/28/2014
Probable (2nd def.)AddedAccounting Standards Update No. 2014-0905/28/2014
Public Business EntityAmendedMaintenance Update 2017-06 (PDF)04/07/2017
Public Business EntityAmendedMaintenance Update 2016-11 (PDF)06/27/2016
Public Business EntityAddedAccounting Standards Update No. 2014-0905/28/2014
RevenueAmendedAccounting Standards Update No. 2014-0905/28/2014
Service ConditionAddedAccounting Standards Update No. 2019-0811/11/2019
Share-Based Payment ArrangementsAddedAccounting Standards Update No. 2025-0405/15/2025
Standalone Selling PriceAddedAccounting Standards Update No. 2014-0905/28/2014
Transaction PriceAddedAccounting Standards Update No. 2014-0905/28/2014
606-10-05-1 through 05-6
AddedAccounting Standards Update No. 2014-0905/28/2014
606-10-10-1 through 10-4
AddedAccounting Standards Update No. 2014-0905/28/2014
606-10-15-1 through 15-5
AddedAccounting Standards Update No. 2014-0905/28/2014
606-10-15-2AmendedMaintenance Update 2021-02 (PDF)01/19/2021
606-10-15-2AmendedAccounting Standards Update No. 2016-2012/21/2016
606-10-15-2AmendedAccounting Standards Update No. 2016-0202/25/2016
606-10-15-2AmendedAccounting Standards Update No. 2016-0101/05/2016
606-10-15-2AAddedAccounting Standards Update No. 2018-0806/21/2018
606-10-15-3AmendedAccounting Standards Update No. 2018-1811/05/2018
606-10-15-3AAddedAccounting Standards Update No. 2025-0709/29/2025
606-10-25-1AmendedAccounting Standards Update No. 2016-1205/09/2016
606-10-25-1 through 25-37
AddedAccounting Standards Update No. 2014-0905/28/2014
606-10-25-3AmendedAccounting Standards Update No. 2016-1205/09/2016
606-10-25-5AmendedAccounting Standards Update No. 2016-1205/09/2016
606-10-25-7AmendedAccounting Standards Update No. 2016-1205/09/2016
606-10-25-16AmendedAccounting Standards Update No. 2016-1004/14/2016
606-10-25-16AAddedAccounting Standards Update No. 2016-1004/14/2016
606-10-25-16BAddedAccounting Standards Update No. 2016-1004/14/2016
606-10-25-17AmendedAccounting Standards Update No. 2016-1004/14/2016
606-10-25-18AmendedAccounting Standards Update No. 2016-1004/14/2016
606-10-25-18AAddedAccounting Standards Update No. 2016-1004/14/2016
606-10-25-18BAddedAccounting Standards Update No. 2016-1004/14/2016
606-10-25-18CAddedAccounting Standards Update No. 2021-0201/28/2021
606-10-25-19AmendedAccounting Standards Update No. 2016-1004/14/2016
606-10-25-21AmendedAccounting Standards Update No. 2016-1004/14/2016
606-10-32-1 through 32-45
AddedAccounting Standards Update No. 2014-0905/28/2014
606-10-32-2AAddedAccounting Standards Update No. 2016-1205/09/2016
606-10-32-21AmendedAccounting Standards Update No. 2016-1205/09/2016
606-10-32-23AmendedAccounting Standards Update No. 2016-1205/09/2016
606-10-32-25AmendedAccounting Standards Update No. 2025-0405/15/2025
606-10-32-25AmendedAccounting Standards Update No. 2019-0811/11/2019
606-10-32-25AmendedAccounting Standards Update No. 2018-0706/20/2018
606-10-32-25AAmendedAccounting Standards Update No. 2025-0405/15/2025
606-10-32-25AAddedAccounting Standards Update No. 2019-0811/11/2019
606-10-45-1 through 45-5
AddedAccounting Standards Update No. 2014-0905/28/2014
606-10-45-3AmendedAccounting Standards Update No. 2016-1306/16/2016
606-10-45-4AmendedAccounting Standards Update No. 2016-1306/16/2016
606-10-50-1 through 50-23
AddedAccounting Standards Update No. 2014-0905/28/2014
606-10-50-4AmendedAccounting Standards Update No. 2016-1306/16/2016
606-10-50-5AmendedAccounting Standards Update No. 2025-1112/08/2025
606-10-50-6AmendedAccounting Standards Update No. 2025-1112/08/2025
606-10-50-8AmendedAccounting Standards Update No. 2025-1112/08/2025
606-10-50-8AmendedAccounting Standards Update No. 2016-2012/21/2016
606-10-50-11AmendedMaintenance Update 2017-08 (PDF)05/01/2017
606-10-50-12AAmendedAccounting Standards Update No. 2025-1112/08/2025
606-10-50-12AAddedAccounting Standards Update No. 2016-2012/21/2016
606-10-50-13AmendedAccounting Standards Update No. 2025-1112/08/2025
606-10-50-14AmendedAccounting Standards Update No. 2016-2012/21/2016
606-10-50-14AAddedAccounting Standards Update No. 2016-2012/21/2016
606-10-50-14BAddedAccounting Standards Update No. 2016-2012/21/2016
606-10-50-15AmendedAccounting Standards Update No. 2025-1112/08/2025
606-10-50-15AmendedAccounting Standards Update No. 2016-2012/21/2016
606-10-55-1 through 55-413
AddedAccounting Standards Update No. 2014-0905/28/2014
606-10-55-3AmendedAccounting Standards Update No. 2025-0405/15/2025
606-10-55-3AmendedAccounting Standards Update No. 2019-0811/11/2019
606-10-55-3AmendedAccounting Standards Update No. 2016-1205/09/2016
606-10-55-3AmendedAccounting Standards Update No. 2016-1004/14/2016
606-10-55-3A through 55-3C
AddedAccounting Standards Update No. 2016-1205/09/2016
606-10-55-36AmendedAccounting Standards Update No. 2016-0803/17/2016
606-10-55-36AAddedAccounting Standards Update No. 2016-0803/17/2016
606-10-55-37AmendedAccounting Standards Update No. 2016-0803/17/2016
606-10-55-37AAddedAccounting Standards Update No. 2016-0803/17/2016
606-10-55-37BAddedAccounting Standards Update No. 2016-0803/17/2016
606-10-55-38AmendedAccounting Standards Update No. 2016-0803/17/2016
606-10-55-39AmendedAccounting Standards Update No. 2016-0803/17/2016
606-10-55-39AAddedAccounting Standards Update No. 2016-0803/17/2016
606-10-55-40AmendedAccounting Standards Update No. 2016-0803/17/2016
606-10-55-54AmendedAccounting Standards Update No. 2016-1004/14/2016
606-10-55-55AmendedAccounting Standards Update No. 2016-1004/14/2016
606-10-55-57AmendedAccounting Standards Update No. 2016-1004/14/2016
606-10-55-58AmendedAccounting Standards Update No. 2016-1004/14/2016
606-10-55-58A through 55-58C
AddedAccounting Standards Update No. 2016-1004/14/2016
606-10-55-59AmendedAccounting Standards Update No. 2016-1004/14/2016
606-10-55-60AmendedAccounting Standards Update No. 2016-1004/14/2016
606-10-55-61SupersededAccounting Standards Update No. 2016-1004/14/2016
606-10-55-62AmendedAccounting Standards Update No. 2016-1004/14/2016
606-10-55-63AmendedAccounting Standards Update No. 2016-1004/14/2016
606-10-55-63AAddedAccounting Standards Update No. 2016-1004/14/2016
606-10-55-64AmendedAccounting Standards Update No. 2016-1004/14/2016
606-10-55-64AAddedAccounting Standards Update No. 2016-1004/14/2016
606-10-55-65AAddedAccounting Standards Update No. 2016-1004/14/2016
606-10-55-65BAddedAccounting Standards Update No. 2016-1004/14/2016
606-10-55-68AmendedAccounting Standards Update No. 2016-0202/25/2016
606-10-55-72AmendedAccounting Standards Update No. 2016-0202/25/2016
606-10-55-88AAmendedAccounting Standards Update No. 2025-0405/15/2025
606-10-55-88AAddedAccounting Standards Update No. 2019-0811/11/2019
606-10-55-88AA through 55-88AC
AddedAccounting Standards Update No. 2025-0405/15/2025
606-10-55-88BAmendedAccounting Standards Update No. 2025-0405/15/2025
606-10-55-88BAddedAccounting Standards Update No. 2019-0811/11/2019
606-10-55-88CAddedAccounting Standards Update No. 2025-0405/15/2025
606-10-55-93AmendedAccounting Standards Update No. 2025-0709/29/2025
606-10-55-93AmendedAccounting Standards Update No. 2016-1004/14/2016
606-10-55-93AmendedAccounting Standards Update No. 2016-0803/17/2016
606-10-55-94 through 55-98
AmendedAccounting Standards Update No. 2016-1205/09/2016
606-10-55-98A through 55-98L
AddedAccounting Standards Update No. 2016-1205/09/2016
606-10-55-108AmendedAccounting Standards Update No. 2016-1306/16/2016
606-10-55-109AmendedAccounting Standards Update No. 2016-1306/16/2016
606-10-55-125AmendedAccounting Standards Update No. 2016-2012/21/2016
606-10-55-127AmendedAccounting Standards Update No. 2016-2012/21/2016
606-10-55-128AmendedAccounting Standards Update No. 2016-2012/21/2016
606-10-55-136AmendedAccounting Standards Update No. 2016-1004/14/2016
606-10-55-137AmendedAccounting Standards Update No. 2016-1004/14/2016
606-10-55-139AmendedAccounting Standards Update No. 2016-1004/14/2016
606-10-55-140A through 55-140F
AddedAccounting Standards Update No. 2016-1004/14/2016
606-10-55-142AmendedAccounting Standards Update No. 2016-1004/14/2016
606-10-55-143AmendedAccounting Standards Update No. 2016-1004/14/2016
606-10-55-145AmendedAccounting Standards Update No. 2016-1004/14/2016
606-10-55-147 through 55-150
AmendedAccounting Standards Update No. 2016-1004/14/2016
606-10-55-150A through 55-150K
AddedAccounting Standards Update No. 2016-1004/14/2016
606-10-55-153AmendedAccounting Standards Update No. 2016-1004/14/2016
606-10-55-153AAddedAccounting Standards Update No. 2016-1004/14/2016
606-10-55-155AmendedAccounting Standards Update No. 2016-1004/14/2016
606-10-55-156AmendedAccounting Standards Update No. 2016-1004/14/2016
606-10-55-157A through 55-157E
AddedAccounting Standards Update No. 2016-1004/14/2016
606-10-55-231AmendedAccounting Standards Update No. 2016-1306/16/2016
606-10-55-237AmendedAccounting Standards Update No. 2016-1306/16/2016
606-10-55-239AmendedAccounting Standards Update No. 2016-1306/16/2016
606-10-55-247AmendedAccounting Standards Update No. 2025-0709/29/2025
606-10-55-248AmendedAccounting Standards Update No. 2025-0709/29/2025
606-10-55-250AmendedAccounting Standards Update No. 2016-1205/09/2016
606-10-55-250A through 55-250D
AddedAccounting Standards Update No. 2025-0709/29/2025
606-10-55-285AmendedAccounting Standards Update No. 2016-2012/21/2016
606-10-55-286AmendedAccounting Standards Update No. 2016-2012/21/2016
606-10-55-293AmendedAccounting Standards Update No. 2016-2012/21/2016
606-10-55-300AmendedAccounting Standards Update No. 2016-2012/21/2016
606-10-55-305AAddedAccounting Standards Update No. 2016-2012/21/2016
606-10-55-309AmendedAccounting Standards Update No. 2016-1004/14/2016
606-10-55-311 through 55-313
AmendedAccounting Standards Update No. 2016-1004/14/2016
606-10-55-316 through 55-318
AmendedAccounting Standards Update No. 2016-0803/17/2016
606-10-55-318A through 55-318C
AddedAccounting Standards Update No. 2016-0803/17/2016
606-10-55-323AmendedAccounting Standards Update No. 2016-0803/17/2016
606-10-55-323AAddedAccounting Standards Update No. 2016-0803/17/2016
606-10-55-323BAddedAccounting Standards Update No. 2016-0803/17/2016
606-10-55-324AmendedAccounting Standards Update No. 2016-0803/17/2016
606-10-55-324A through 55-324G
AddedAccounting Standards Update No. 2016-0803/17/2016
606-10-55-326 through 55-328
AmendedAccounting Standards Update No. 2016-0803/17/2016
606-10-55-328A through 55-328C
AddedAccounting Standards Update No. 2016-0803/17/2016
606-10-55-329 through 55-331
AmendedAccounting Standards Update No. 2016-0803/17/2016
606-10-55-333AmendedAccounting Standards Update No. 2016-0803/17/2016
606-10-55-333AAddedAccounting Standards Update No. 2016-0803/17/2016
606-10-55-333BAddedAccounting Standards Update No. 2016-0803/17/2016
606-10-55-334AmendedAccounting Standards Update No. 2016-0803/17/2016
606-10-55-334A through 55-334F
AddedAccounting Standards Update No. 2016-0803/17/2016
606-10-55-361AmendedAccounting Standards Update No. 2016-1004/14/2016
606-10-55-363AmendedAccounting Standards Update No. 2016-1004/14/2016
606-10-55-363AAddedAccounting Standards Update No. 2016-1004/14/2016
606-10-55-363BAddedAccounting Standards Update No. 2016-1004/14/2016
606-10-55-364AmendedAccounting Standards Update No. 2016-1004/14/2016
606-10-55-365AmendedAccounting Standards Update No. 2016-1004/14/2016
606-10-55-365AAddedAccounting Standards Update No. 2016-1004/14/2016
606-10-55-366 through 55-368
AmendedAccounting Standards Update No. 2016-1004/14/2016
606-10-55-370 through 55-372
AmendedAccounting Standards Update No. 2016-1004/14/2016
606-10-55-372AAddedAccounting Standards Update No. 2016-1004/14/2016
606-10-55-373 through 55-383
AmendedAccounting Standards Update No. 2016-1004/14/2016
606-10-55-385 through 55-392
AmendedAccounting Standards Update No. 2016-1004/14/2016
606-10-55-392A through 55-392D
AddedAccounting Standards Update No. 2016-1004/14/2016
606-10-55-393AmendedAccounting Standards Update No. 2016-1004/14/2016
606-10-55-394AmendedAccounting Standards Update No. 2016-1004/14/2016
606-10-55-396 through 55-399
AmendedAccounting Standards Update No. 2016-1004/14/2016
606-10-55-399A through 55-399O
AddedAccounting Standards Update No. 2016-1004/14/2016
606-10-55-404AmendedAccounting Standards Update No. 2025-1212/17/2025
606-10-55-407AmendedAccounting Standards Update No. 2016-0202/25/2016
606-10-60-1 through 60-16
AddedAccounting Standards Update No. 2014-0905/28/2014
606-10-65-1AmendedAccounting Standards Update No. 2020-0506/03/2020
606-10-65-1AmendedAccounting Standards Update No. 2017-1309/29/2017
606-10-65-1AmendedAccounting Standards Update No. 2017-0502/22/2017
606-10-65-1AmendedAccounting Standards Update No. 2017-0301/23/2017
606-10-65-1AmendedAccounting Standards Update No. 2016-2012/21/2016
606-10-65-1AmendedAccounting Standards Update No. 2016-1205/09/2016
606-10-65-1AmendedAccounting Standards Update No. 2016-1004/14/2016
606-10-65-1AmendedAccounting Standards Update No. 2016-0803/17/2016
606-10-65-1AmendedAccounting Standards Update No. 2015-1408/12/2015
606-10-65-1AddedAccounting Standards Update No. 2014-0905/28/2014
606-10-65-2AddedAccounting Standards Update No. 2025-0405/15/2025
606-10-65-3AddedAccounting Standards Update No. 2025-0709/29/2025
Source downloaded (UTC): 2026-09-09T23:17:52.895Z to 2026-09-09T23:17:52.895Z Record version: sha256:15f5f86db29dbd6ca24d075a5b48772edd22046cd41309e0883e3cd762e5afe0 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 606-10-05: 05 Overview and Background [Read section](https://asc.understandingaccounting.org/asc/606/10/#05-overview-and-background) SEC content: no ##### [606-10-05-1](https://asc.understandingaccounting.org/asc/606/10/#606-10-05-1) Pending content: no Source downloaded (UTC): 2026-09-09T23:17:52.895Z to 2026-09-09T23:17:52.895Z Record version: sha256:31576b7603c9fbc7b285b6dab3e5dbe5872386ba903acc2a0e116270a893305a Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Topic specifies the accounting for [revenue](https://asc.understandingaccounting.org/glossary/r/#revenue "Inflows or other enhancements of assets of an entity or settlements of its liabilities (or a combination of both) from delivering or producing goods, rendering services, or other activities that constitute the entity's ongoing major or central operations.") from [contracts](https://asc.understandingaccounting.org/glossary/c/#contract "An agreement between two or more parties that creates enforceable rights and obligations.") with [customers](https://asc.understandingaccounting.org/glossary/c/#customer "A party that has contracted with an entity to obtain goods or services that are an output of the entity's ordinary activities in exchange for consideration."). ##### [606-10-05-2](https://asc.understandingaccounting.org/asc/606/10/#606-10-05-2) Pending content: no Source downloaded (UTC): 2026-09-09T23:17:52.895Z to 2026-09-09T23:17:52.895Z Record version: sha256:00e2efaee366ccdc6af1d0c8e8e700e7c81c8f3fdad3466b5af08081fd2cdee5 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Topic establishes principles for reporting useful information to users of financial statements about the nature, amount, timing, and uncertainty of revenue and cash flows arising from the entity's contracts with customers. ##### [606-10-05-3](https://asc.understandingaccounting.org/asc/606/10/#606-10-05-3) Pending content: no Source downloaded (UTC): 2026-09-09T23:17:52.895Z to 2026-09-09T23:17:52.895Z Record version: sha256:5f67289dbc637edb9198ca192a92f2e2a50a134208e356d9cf4b89cc19f87423 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The core principle of this Topic is that an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. ##### [606-10-05-4](https://asc.understandingaccounting.org/asc/606/10/#606-10-05-4) Pending content: no Source downloaded (UTC): 2026-09-09T23:17:52.895Z to 2026-09-09T23:17:52.895Z Record version: sha256:a095268cf4eb9031cc3ce90608e1656fee65788431dcc42b19a71b6a82f7fd1a Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An entity recognizes revenue in accordance with that core principle by applying the following steps: 1. a Step 1: Identify the contract(s) with a customer—A [contract](https://asc.understandingaccounting.org/glossary/c/#contract "An agreement between two or more parties that creates enforceable rights and obligations.") is an agreement between two or more parties that creates enforceable rights and obligations. The guidance in this Topic applies to each contract that has been agreed upon with a customer and meets specified criteria. In some cases, this Topic requires an entity to combine contracts and account for them as one contract. This Topic also provides requirements for the accounting for contract modifications. (See paragraphs [606-10-25-1 through 25-13](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-1) .) 2. b Step 2: Identify the performance obligations in the contract—A contract includes promises to transfer goods or services to a customer. If those goods or services are distinct, the promises are [performance obligations](https://asc.understandingaccounting.org/glossary/p/#performance-obligation "A promise in a contract with a customer to transfer to the customer either: A good or service (or a bundle of goods or services) that is distinct A series of distinct goods or services that are substantially the same and that have the same pattern of transfer to the customer.") and are accounted for separately. A good or service is distinct if the customer can benefit from the good or service on its own or together with other resources that are readily available to the customer and the entity's promise to transfer the good or service to the customer is separately identifiable from other promises in the contract. (See paragraphs [606-10-25-14 through 25-22](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-14) .) 3. c Step 3: Determine the transaction price—The [transaction price](https://asc.understandingaccounting.org/glossary/t/#transaction-price "The amount of consideration to which an entity expects to be entitled in exchange for transferring promised goods or services to a customer, excluding amounts collected on behalf of third parties.") is the amount of consideration in a contract to which an entity expects to be entitled in exchange for transferring promised goods or services to a customer. The transaction price can be a fixed amount of customer consideration, but it may sometimes include variable consideration or consideration in a form other than cash. The transaction price also is adjusted for the effects of the time value of money if the contract includes a significant financing component and for any consideration payable to the customer. If the consideration is variable, an entity estimates the amount of consideration to which it will be entitled in exchange for the promised goods or services. The estimated amount of variable consideration will be included in the transaction price only to the extent that it is [probable](https://asc.understandingaccounting.org/glossary/p/#probable "The future event or events are likely to occur.") that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved. (See paragraphs [606-10-32-2 through 32-27](https://asc.understandingaccounting.org/asc/606/10/#606-10-32-2) .) 4. d Step 4: Allocate the transaction price to the performance obligations in the contract—An entity typically allocates the transaction price to each performance obligation on the basis of the relative [standalone selling prices](https://asc.understandingaccounting.org/glossary/s/#standalone-selling-price "The price at which an entity would sell a promised good or service separately to a customer.") of each distinct good or service promised in the contract. If a standalone selling price is not observable, an entity estimates it. Sometimes, the transaction price includes a discount or a variable amount of consideration that relates entirely to a part of the contract. The requirements specify when an entity allocates the discount or variable consideration to one or more, but not all, performance obligations (or distinct goods or services) in the contract. (See paragraphs [606-10-32-28 through 32-41](https://asc.understandingaccounting.org/asc/606/10/#606-10-32-28) .) 5. e Step 5: Recognize revenue when (or as) the entity satisfies a performance obligation—An entity recognizes revenue when (or as) it satisfies a performance obligation by transferring a promised good or service to a customer (which is when the customer obtains control of that good or service). The amount of revenue recognized is the amount allocated to the satisfied performance obligation. A performance obligation may be satisfied at a point in time (typically for promises to transfer goods to a customer) or over time (typically for promises to transfer services to a customer). For performance obligations satisfied over time, an entity recognizes revenue over time by selecting an appropriate method for measuring the entity's progress toward complete satisfaction of that performance obligation. (See paragraphs [606-10-25-23 through 25-30](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-23) .) ##### [606-10-05-5](https://asc.understandingaccounting.org/asc/606/10/#606-10-05-5) Pending content: no Source downloaded (UTC): 2026-09-09T23:17:52.895Z to 2026-09-09T23:17:52.895Z Record version: sha256:cfa076588715406a49534f819db3a647431c8dcae4811b16e8ec5e5bf60bab6d Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Topic also includes a cohesive set of disclosure requirements that would result in an entity providing users of financial statements with comprehensive information about the nature, amount, timing, and uncertainty of revenue and cash flows arising from the entity's contracts with customers. Specifically, Section 606-10-50 requires an entity to provide information about: 1. a Revenue recognized from contracts with customers, including the disaggregation of revenue into appropriate categories 2. b Contract balances, including the opening and closing balances of receivables, [contract assets](https://asc.understandingaccounting.org/glossary/c/#contract-asset "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)."), and [contract liabilities](https://asc.understandingaccounting.org/glossary/c/#contract-liability "An entity's obligation to transfer goods or services to a customer for which the entity has received consideration (or the amount is due) from the customer.") 3. c Performance obligations, including when the entity typically satisfies its performance obligations and the transaction price that is allocated to the remaining performance obligations in a contract 4. d Significant judgments, and changes in judgments, made in applying the requirements to those contracts. Additionally, Section 340-40-50 requires an entity to provide quantitative and/or qualitative information about assets recognized from the costs to obtain or fulfill a contract with a customer. ##### [606-10-05-6](https://asc.understandingaccounting.org/asc/606/10/#606-10-05-6) Pending content: no Source downloaded (UTC): 2026-09-09T23:17:52.895Z to 2026-09-09T23:17:52.895Z Record version: sha256:02d30dc1ea71d81247e4504828dad95f58d3160c8eeb7e7da47734bfbcb96897 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Paragraphs presented in **bold type** in this Topic state the main principles. All paragraphs have equal authority. Source downloaded (UTC): 2026-09-09T23:17:55.522Z to 2026-09-09T23:17:55.522Z Record version: sha256:1707c0804670abdc8cfc2532286eb8efe1829f86a68fbbc5c877599e66cf3c7f Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 606-10-10: 10 Objectives [Read section](https://asc.understandingaccounting.org/asc/606/10/#10-objectives) SEC content: no ##### [606-10-10-1](https://asc.understandingaccounting.org/asc/606/10/#606-10-10-1) Pending content: no Source downloaded (UTC): 2026-09-09T23:17:55.522Z to 2026-09-09T23:17:55.522Z Record version: sha256:266b4b9cb1dd0c2874fa28312db2d8d20b546e926201833064e86ed7ff610feb Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. **The objective of the guidance in this Topic is to establish the principles that an entity shall apply to report useful information to users of financial statements about the nature, amount, timing, and uncertainty of [revenue](https://asc.understandingaccounting.org/glossary/r/#revenue "Inflows or other enhancements of assets of an entity or settlements of its liabilities (or a combination of both) from delivering or producing goods, rendering services, or other activities that constitute the entity's ongoing major or central operations.") and cash flows arising from a [contract](https://asc.understandingaccounting.org/glossary/c/#contract "An agreement between two or more parties that creates enforceable rights and obligations.") with a [customer](https://asc.understandingaccounting.org/glossary/c/#customer "A party that has contracted with an entity to obtain goods or services that are an output of the entity's ordinary activities in exchange for consideration.").** #### Meeting the Objective ##### [606-10-10-2](https://asc.understandingaccounting.org/asc/606/10/#606-10-10-2) Pending content: no Source downloaded (UTC): 2026-09-09T23:17:55.522Z to 2026-09-09T23:17:55.522Z Record version: sha256:575a0652193241582559c9301324fb7b09ab981168eca3951dd8b06df0999049 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. To meet the objective in paragraph [606-10-10-1](https://asc.understandingaccounting.org/asc/606/10/#606-10-10-1), the core principle of the guidance in this Topic is that an entity shall recognize [revenue](https://asc.understandingaccounting.org/glossary/r/#revenue "Inflows or other enhancements of assets of an entity or settlements of its liabilities (or a combination of both) from delivering or producing goods, rendering services, or other activities that constitute the entity's ongoing major or central operations.") to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. ##### [606-10-10-3](https://asc.understandingaccounting.org/asc/606/10/#606-10-10-3) Pending content: no Source downloaded (UTC): 2026-09-09T23:17:55.522Z to 2026-09-09T23:17:55.522Z Record version: sha256:47fba1c05b3274de98b9ba29c51f1b75ea5f27eadc6bddc7f7f37ac272649c10 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An entity shall consider the terms of the [contract](https://asc.understandingaccounting.org/glossary/c/#contract "An agreement between two or more parties that creates enforceable rights and obligations.") and all relevant facts and circumstances when applying this guidance. An entity shall apply this guidance, including the use of any practical expedients, consistently to contracts with similar characteristics and in similar circumstances. ##### [606-10-10-4](https://asc.understandingaccounting.org/asc/606/10/#606-10-10-4) Pending content: no Source downloaded (UTC): 2026-09-09T23:17:55.522Z to 2026-09-09T23:17:55.522Z Record version: sha256:1409d6b70ae3e92128047393f655878ec4f972d4a2bbb103ea40595c051c31c6 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This guidance specifies the accounting for an individual contract with a customer. However, as a practical expedient, an entity may apply this guidance to a portfolio of contracts (or [performance obligations](https://asc.understandingaccounting.org/glossary/p/#performance-obligation "A promise in a contract with a customer to transfer to the customer either: A good or service (or a bundle of goods or services) that is distinct A series of distinct goods or services that are substantially the same and that have the same pattern of transfer to the customer.")) with similar characteristics if the entity reasonably expects that the effects on the financial statements of applying this guidance to the portfolio would not differ materially from applying this guidance to the individual contracts (or performance obligations) within that portfolio. When accounting for a portfolio, an entity shall use estimates and assumptions that reflect the size and composition of the portfolio. Source downloaded (UTC): 2026-09-09T23:17:57.646Z to 2026-09-09T23:17:57.646Z Record version: sha256:0c882a627b5b1625a21a37c9c1cf311044524949d32a833d5237cb85f2a20c41 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 606-10-15: 15 Scope and Scope Exceptions [Read section](https://asc.understandingaccounting.org/asc/606/10/#15-scope-and-scope-exceptions) SEC content: no #### Entities ##### [606-10-15-1](https://asc.understandingaccounting.org/asc/606/10/#606-10-15-1) Pending content: no Source downloaded (UTC): 2026-09-09T23:17:57.646Z to 2026-09-09T23:17:57.646Z Record version: sha256:8e00f5997528b7874d6bdab1be2fd10f06c86e2b2d6315ad9a01de3641030103 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The guidance in this Subtopic applies to all entities. #### Transactions ##### [606-10-15-2](https://asc.understandingaccounting.org/asc/606/10/#606-10-15-2) Pending content: no Source downloaded (UTC): 2026-09-09T23:17:57.646Z to 2026-09-09T23:17:57.646Z Record version: sha256:c5538807410e384605322df8098b7203e3de087fe256a7a950ea27bc7350c670 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An entity shall apply the guidance in this Topic to all [contracts](https://asc.understandingaccounting.org/glossary/c/#contract "An agreement between two or more parties that creates enforceable rights and obligations.") with [customers](https://asc.understandingaccounting.org/glossary/c/#customer "A party that has contracted with an entity to obtain goods or services that are an output of the entity's ordinary activities in exchange for consideration."), except the following: 1. a Lease contracts within the scope of Topic 842, Leases. 2. b Contracts within the scope of Topic 944, Financial Services—Insurance. 3. c Financial instruments and other contractual rights or obligations within the scope of the following Topics: 1. 1 Topic 310, Receivables 2. 2 Topic 320, Investments—Debt Securities 3. 2a Topic 321, Investments—Equity Securities 4. 3 Topic 323, Investments—Equity Method and Joint Ventures 5. 4 Topic 325, Investments—Other 6. 5 Topic 405, Liabilities 7. 6 Topic 470, Debt 8. 7 Topic 815, Derivatives and Hedging 9. 8 Topic 825, Financial Instruments 10. 9 Topic 860, Transfers and Servicing. 4. d Guarantees (other than product or service warranties) within the scope of Topic 460, Guarantees. 5. e Nonmonetary exchanges between entities in the same line of business to facilitate sales to customers or potential customers. For example, this Topic would not apply to a contract between two oil companies that agree to an exchange of oil to fulfill demand from their customers in different specified locations on a timely basis. Topic 845 on nonmonetary transactions may apply to nonmonetary exchanges that are not within the scope of this Topic. ##### [606-10-15-2A](https://asc.understandingaccounting.org/asc/606/10/#606-10-15-2A) Pending content: no Source downloaded (UTC): 2026-09-09T23:17:57.646Z to 2026-09-09T23:17:57.646Z Record version: sha256:29b28379f79309c68642a9653f970f40e9d42f51449e8d9eff1073b496b81311 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An entity shall consider the guidance in Subtopic 958-605 on not-for-profit entities—revenue recognition—contributions when determining whether a transaction is a contribution within the scope of Subtopic 958-605 or a transaction within the scope of this Topic. ##### [606-10-15-3](https://asc.understandingaccounting.org/asc/606/10/#606-10-15-3) Pending content: no Source downloaded (UTC): 2026-09-09T23:17:57.646Z to 2026-09-09T23:17:57.646Z Record version: sha256:1a2665dea31cd7dc6daa06e97586c69309af647d6aa27d56cde4da770ab97f79 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An entity shall apply the guidance in this Topic to a contract (other than a contract listed in paragraph [606-10-15-2](https://asc.understandingaccounting.org/asc/606/10/#606-10-15-2)) only if the counterparty to the contract is a customer. A customer is a party that has contracted with an entity to obtain goods or services that are an output of the entity's ordinary activities in exchange for consideration. ##### [606-10-15-3A](https://asc.understandingaccounting.org/asc/606/10/#606-10-15-3A) Pending content: yes Source downloaded (UTC): 2026-09-09T23:17:57.646Z to 2026-09-09T23:17:57.646Z Record version: sha256:250f3e5a7fa0d2bf1176207b20d0fb9f993866470fc46e72621e791f6b251575 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Transition date:(P) December 16, 2026; (N) December 16, 2026Transition guidance: [606-10-65-3](https://asc.understandingaccounting.org/asc/606/10/#606-10-65-3)An entity shall apply the guidance in this Topic, including the guidance on noncash consideration in paragraphs [606-10-32-21 through 32-24](https://asc.understandingaccounting.org/asc/606/10/#606-10-32-21) , to a contract with share-based noncash consideration (for example, shares, share options, or other equity instruments) from a customer for the transfer of goods or services. The guidance in other Topics (including Topic 815 on derivatives and hedging and Topic 321 on equity securities) does not apply to share-based noncash consideration from a customer for the transfer of goods or services unless and until the entity’s right to receive or retain the share-based noncash consideration is unconditional under this Topic. To assess whether the right is unconditional under this Topic, only the contract terms that relate to the entity’s performance obligations (or a specific outcome of the entity’s performance) within the scope of this Topic are evaluated. The determination of whether the right is unconditional is consistent with the guidance in paragraph [606-10-45-4](https://asc.understandingaccounting.org/asc/606/10/#606-10-45-4), which states that a right to consideration is unconditional if only the passage of time is required before payment of that consideration is due. ##### [606-10-15-4](https://asc.understandingaccounting.org/asc/606/10/#606-10-15-4) Pending content: no Source downloaded (UTC): 2026-09-09T23:17:57.646Z to 2026-09-09T23:17:57.646Z Record version: sha256:ff197ac28d4327ae500e0cb029887f9f20aae91a91df0de4992c421a7f2d2c53 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. A contract with a customer may be partially within the scope of this Topic and partially within the scope of other Topics listed in paragraph [606-10-15-2](https://asc.understandingaccounting.org/asc/606/10/#606-10-15-2). 1. a If the other Topics specify how to separate and/or initially measure one or more parts of the contract, then an entity shall first apply the separation and/or measurement guidance in those Topics. An entity shall exclude from the [transaction price](https://asc.understandingaccounting.org/glossary/t/#transaction-price "The amount of consideration to which an entity expects to be entitled in exchange for transferring promised goods or services to a customer, excluding amounts collected on behalf of third parties.") the amount of the part (or parts) of the contract that are initially measured in accordance with other Topics and shall apply paragraphs [606-10-32-28 through 32-41](https://asc.understandingaccounting.org/asc/606/10/#606-10-32-28) to allocate the amount of the transaction price that remains (if any) to each [performance obligation](https://asc.understandingaccounting.org/glossary/p/#performance-obligation "A promise in a contract with a customer to transfer to the customer either: A good or service (or a bundle of goods or services) that is distinct A series of distinct goods or services that are substantially the same and that have the same pattern of transfer to the customer.") within the scope of this Topic and to any other parts of the contract identified by paragraph [606-10-15-4(b)](https://asc.understandingaccounting.org/asc/606/10/#606-10-15-4). 2. b If the other Topics do not specify how to separate and/or initially measure one or more parts of the contract, then the entity shall apply the guidance in this Topic to separate and/or initially measure the part (or parts) of the contract. ##### [606-10-15-5](https://asc.understandingaccounting.org/asc/606/10/#606-10-15-5) Pending content: no Source downloaded (UTC): 2026-09-09T23:17:57.646Z to 2026-09-09T23:17:57.646Z Record version: sha256:140a7997c6c24e1706457ca58f0de306bbc66c7710cb8c35602558ccb0eaa066 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Subtopic 340-40 on other assets and deferred costs from contracts with customers includes guidance on accounting for the incremental costs of obtaining a contract with a customer and for the costs incurred to fulfill a contract with a customer if those costs are not within the scope of another Topic (see Subtopic 340-40). An entity shall apply that guidance only to the costs incurred that relate to a contract with a customer (or part of that contract) that is within the scope of the guidance in this Topic. Source downloaded (UTC): 2026-09-09T23:18:03.513Z to 2026-09-09T23:18:03.513Z Record version: sha256:6cf23df720eecbf4b2752e02dcd5e3b3010994afbf9b931d44f76c98088941b7 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 606-10-25: 25 Recognition [Read section](https://asc.understandingaccounting.org/asc/606/10/#25-recognition) SEC content: no #### Identifying the Contract ##### [606-10-25-1](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-1) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:03.513Z to 2026-09-09T23:18:03.513Z Record version: sha256:cc13f904e28e763af370f9094449f9e765119311868809489332fde6aff882b3 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. **An entity shall account for a [contract](https://asc.understandingaccounting.org/glossary/c/#contract "An agreement between two or more parties that creates enforceable rights and obligations.") with a [customer](https://asc.understandingaccounting.org/glossary/c/#customer "A party that has contracted with an entity to obtain goods or services that are an output of the entity's ordinary activities in exchange for consideration.") that is within the scope of this Topic only when all of the following criteria are met:** 1. a **The parties to the contract have approved the contract (in writing, orally, or in accordance with other customary business practices) and are committed to perform their respective obligations.** 2. b **The entity can identify each party's rights regarding the goods or services to be transferred.** 3. c **The entity can identify the payment terms for the goods or services to be transferred.** 4. d **The contract has commercial substance (that is, the risk, timing, or amount of the entity's future cash flows is expected to change as a result of the contract).** 5. e **It is probable that the entity will collect substantially all of the consideration to which it will be entitled in exchange for the goods or services that will be transferred to the customer (see paragraphs [606-10-55-3A through 55-3C](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-3A) ). In evaluating whether collectibility of an amount of consideration is probable, an entity shall consider only the customer's ability and intention to pay that amount of consideration when it is due. The amount of consideration to which the entity will be entitled may be less than the price stated in the contract if the consideration is variable because the entity may offer the customer a price concession (see paragraph [606-10-32-7](https://asc.understandingaccounting.org/asc/606/10/#606-10-32-7)).** ##### [606-10-25-2](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-2) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:03.513Z to 2026-09-09T23:18:03.513Z Record version: sha256:dac3afa4405ea8e36d7108ae56f1d57ac046ece6466f3d827eb2958e650c4f89 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. A contract is an agreement between two or more parties that creates enforceable rights and obligations. Enforceability of the rights and obligations in a contract is a matter of law. Contracts can be written, oral, or implied by an entity's customary business practices. The practices and processes for establishing contracts with customers vary across legal jurisdictions, industries, and entities. In addition, they may vary within an entity (for example, they may depend on the class of customer or the nature of the promised goods or services). An entity shall consider those practices and processes in determining whether and when an agreement with a customer creates enforceable rights and obligations. ##### [606-10-25-3](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-3) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:03.513Z to 2026-09-09T23:18:03.513Z Record version: sha256:b299068cf4e193813c0250e325c925b82f99d761a0885a5bc38e5714b540ca1d Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Some contracts with customers may have no fixed duration and can be terminated or modified by either party at any time. Other contracts may automatically renew on a periodic basis that is specified in the contract. An entity shall apply the guidance in this Topic to the duration of the contract (that is, the contractual period) in which the parties to the contract have present enforceable rights and obligations. In evaluating the criterion in paragraph [606-10-25-1(e)](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-1), an entity shall assess the collectibility of the consideration promised in a contract for the goods or services that will be transferred to the customer rather than assessing the collectibility of the consideration promised in the contract for all of the promised goods or services (see paragraphs [606-10-55-3A through 55-3C](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-3A) ). However, if an entity determines that all of the criteria in paragraph [606-10-25-1](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-1) are met, the remainder of the guidance in this Topic shall be applied to all of the promised goods or services in the contract. ##### [606-10-25-4](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-4) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:03.513Z to 2026-09-09T23:18:03.513Z Record version: sha256:cfbe398d47027310402c0e99ce016cf0b46b812ac4af62908b27c7af8afde3c5 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. For the purpose of applying the guidance in this Topic, a contract does not exist if each party to the contract has the unilateral enforceable right to terminate a wholly unperformed contract without compensating the other party (or parties). A contract is wholly unperformed if both of the following criteria are met: 1. a The entity has not yet transferred any promised goods or services to the customer. 2. b The entity has not yet received, and is not yet entitled to receive, any consideration in exchange for promised goods or services. ##### [606-10-25-5](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-5) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:03.513Z to 2026-09-09T23:18:03.513Z Record version: sha256:16750b9e7552edbb832c0bba8d61a1ac52dc210181dc507f890eac819c175291 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If a contract with a customer meets the criteria in paragraph [606-10-25-1](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-1) at contract inception, an entity shall not reassess those criteria unless there is an indication of a significant change in facts and circumstances. For example, if a customer's ability to pay the consideration deteriorates significantly, an entity would reassess whether it is probable that the entity will collect the consideration to which the entity will be entitled in exchange for the remaining goods or services that will be transferred to the customer (see paragraphs [606-10-55-3A through 55-3C](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-3A) ). ##### [606-10-25-6](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-6) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:03.513Z to 2026-09-09T23:18:03.513Z Record version: sha256:4f2a1c65901800153e5c4e7b342a93b9cfa8ae5a24511d787105d2688177bab0 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If a contract with a customer does not meet the criteria in paragraph [606-10-25-1](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-1), an entity shall continue to assess the contract to determine whether the criteria in paragraph [606-10-25-1](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-1) are subsequently met. ##### [606-10-25-7](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-7) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:03.513Z to 2026-09-09T23:18:03.513Z Record version: sha256:7905499511392c5178c51c7f9e78f8fcbb5fc9fbe891fc0d5e3cb3b7e504ab6f Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. When a contract with a customer does not meet the criteria in paragraph [606-10-25-1](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-1) and an entity receives consideration from the customer, the entity shall recognize the consideration received as [revenue](https://asc.understandingaccounting.org/glossary/r/#revenue "Inflows or other enhancements of assets of an entity or settlements of its liabilities (or a combination of both) from delivering or producing goods, rendering services, or other activities that constitute the entity's ongoing major or central operations.") only when one or more of the following events have occurred: 1. a The entity has no remaining obligations to transfer goods or services to the customer, and all, or substantially all, of the consideration promised by the customer has been received by the entity and is nonrefundable. 2. b The contract has been terminated, and the consideration received from the customer is nonrefundable. 3. c The entity has transferred control of the goods or services to which the consideration that has been received relates, the entity has stopped transferring goods or services to the customer (if applicable) and has no obligation under the contract to transfer additional goods or services, and the consideration received from the customer is nonrefundable. ##### [606-10-25-8](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-8) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:03.513Z to 2026-09-09T23:18:03.513Z Record version: sha256:b2083329cc0e6263389928693bbc4b4dde1abcfdfc63bb07b39ba7f67cae70e0 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An entity shall recognize the consideration received from a customer as a liability until one of the events in paragraph [606-10-25-7](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-7) occurs or until the criteria in paragraph [606-10-25-1](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-1) are subsequently met (see paragraph [606-10-25-6](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-6)). Depending on the facts and circumstances relating to the contract, the liability recognized represents the entity's obligation to either transfer goods or services in the future or refund the consideration received. In either case, the liability shall be measured at the amount of consideration received from the customer. #### Combination of Contracts ##### [606-10-25-9](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-9) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:03.513Z to 2026-09-09T23:18:03.513Z Record version: sha256:3cee18806985245cd629b2ed9de37662862e7fcd82792e1f89926ddb60a7fac5 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An entity shall combine two or more [contracts](https://asc.understandingaccounting.org/glossary/c/#contract "An agreement between two or more parties that creates enforceable rights and obligations.") entered into at or near the same time with the same [customer](https://asc.understandingaccounting.org/glossary/c/#customer "A party that has contracted with an entity to obtain goods or services that are an output of the entity's ordinary activities in exchange for consideration.") (or related parties of the customer) and account for the contracts as a single contract if one or more of the following criteria are met: 1. a The contracts are negotiated as a package with a single commercial objective. 2. b The amount of consideration to be paid in one contract depends on the price or performance of the other contract. 3. c The goods or services promised in the contracts (or some goods or services promised in each of the contracts) are a single [performance obligation](https://asc.understandingaccounting.org/glossary/p/#performance-obligation "A promise in a contract with a customer to transfer to the customer either: A good or service (or a bundle of goods or services) that is distinct A series of distinct goods or services that are substantially the same and that have the same pattern of transfer to the customer.") in accordance with paragraphs [606-10-25-14 through 25-22](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-14) . #### Contract Modifications ##### [606-10-25-10](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-10) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:03.513Z to 2026-09-09T23:18:03.513Z Record version: sha256:e596f0ee621d91d01a4ad4e58afa0029c9235c9483e05d5552a0429ec6f593b8 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. A contract modification is a change in the scope or price (or both) of a [contract](https://asc.understandingaccounting.org/glossary/c/#contract "An agreement between two or more parties that creates enforceable rights and obligations.") that is approved by the parties to the contract. In some industries and jurisdictions, a contract modification may be described as a change order, a variation, or an amendment. A contract modification exists when the parties to a contract approve a modification that either creates new or changes existing enforceable rights and obligations of the parties to the contract. A contract modification could be approved in writing, by oral agreement, or implied by customary business practices. If the parties to the contract have not approved a contract modification, an entity shall continue to apply the guidance in this Topic to the existing contract until the contract modification is approved. ##### [606-10-25-11](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-11) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:03.513Z to 2026-09-09T23:18:03.513Z Record version: sha256:f81616417d754c76e42c95ee036f6c7b3c428c424004bc40b21d4faa94f63568 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. A contract modification may exist even though the parties to the contract have a dispute about the scope or price (or both) of the modification or the parties have approved a change in the scope of the contract but have not yet determined the corresponding change in price. In determining whether the rights and obligations that are created or changed by a modification are enforceable, an entity shall consider all relevant facts and circumstances including the terms of the contract and other evidence. If the parties to a contract have approved a change in the scope of the contract but have not yet determined the corresponding change in price, an entity shall estimate the change to the [transaction price](https://asc.understandingaccounting.org/glossary/t/#transaction-price "The amount of consideration to which an entity expects to be entitled in exchange for transferring promised goods or services to a customer, excluding amounts collected on behalf of third parties.") arising from the modification in accordance with paragraphs [606-10-32-5 through 32-9](https://asc.understandingaccounting.org/asc/606/10/#606-10-32-5) on estimating variable consideration and paragraphs [606-10-32-11 through 32-13](https://asc.understandingaccounting.org/asc/606/10/#606-10-32-11) on constraining estimates of variable consideration. ##### [606-10-25-12](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-12) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:03.513Z to 2026-09-09T23:18:03.513Z Record version: sha256:5682b63a7d710a6fb02b37012d0beca98a28b70b7d41000d86abe6303c6d0566 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An entity shall account for a contract modification as a separate contract if both of the following conditions are present: 1. a The scope of the contract increases because of the addition of promised goods or services that are distinct (in accordance with paragraphs [606-10-25-18 through 25-22](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-18) ). 2. b The price of the contract increases by an amount of consideration that reflects the entity's [standalone selling prices](https://asc.understandingaccounting.org/glossary/s/#standalone-selling-price "The price at which an entity would sell a promised good or service separately to a customer.") of the additional promised goods or services and any appropriate adjustments to that price to reflect the circumstances of the particular contract. For example, an entity may adjust the standalone selling price of an additional good or service for a discount that the customer receives, because it is not necessary for the entity to incur the selling-related costs that it would incur when selling a similar good or service to a new customer. ##### [606-10-25-13](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-13) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:03.513Z to 2026-09-09T23:18:03.513Z Record version: sha256:bc74d0cbc0f486e8e06b26fa21379b548bb823395750522d33a9e9e77053cb54 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If a contract modification is not accounted for as a separate contract in accordance with paragraph [606-10-25-12](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-12), an entity shall account for the promised goods or services not yet transferred at the date of the contract modification (that is, the remaining promised goods or services) in whichever of the following ways is applicable: 1. a An entity shall account for the contract modification as if it were a termination of the existing contract, and the creation of a new contract, if the remaining goods or services are distinct from the goods or services transferred on or before the date of the contract modification. The amount of consideration to be allocated to the remaining [performance obligations](https://asc.understandingaccounting.org/glossary/p/#performance-obligation "A promise in a contract with a customer to transfer to the customer either: A good or service (or a bundle of goods or services) that is distinct A series of distinct goods or services that are substantially the same and that have the same pattern of transfer to the customer.") (or to the remaining distinct goods or services in a single performance obligation identified in accordance with paragraph [606-10-25-14(b)](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-14)) is the sum of: 1. 1 The consideration promised by the customer (including amounts already received from the customer) that was included in the estimate of the transaction price and that had not been recognized as [revenue](https://asc.understandingaccounting.org/glossary/r/#revenue "Inflows or other enhancements of assets of an entity or settlements of its liabilities (or a combination of both) from delivering or producing goods, rendering services, or other activities that constitute the entity's ongoing major or central operations.") and 2. 2 The consideration promised as part of the contract modification. 2. b An entity shall account for the contract modification as if it were a part of the existing contract if the remaining goods or services are not distinct and, therefore, form part of a single performance obligation that is partially satisfied at the date of the contract modification. The effect that the contract modification has on the transaction price, and on the entity's measure of progress toward complete satisfaction of the performance obligation, is recognized as an adjustment to revenue (either as an increase in or a reduction of revenue) at the date of the contract modification (that is, the adjustment to revenue is made on a cumulative catch-up basis). 3. c If the remaining goods or services are a combination of items (a) and (b), then the entity shall account for the effects of the modification on the unsatisfied (including partially unsatisfied) performance obligations in the modified contract in a manner that is consistent with the objectives of this paragraph. #### Identifying Performance Obligations ##### [606-10-25-14](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-14) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:03.513Z to 2026-09-09T23:18:03.513Z Record version: sha256:315a8ea82d4b5b0df6abfcdaf41484b1ac74e67170187bcb482afe96ecda7560 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. **At [contract](https://asc.understandingaccounting.org/glossary/c/#contract "An agreement between two or more parties that creates enforceable rights and obligations.") inception, an entity shall assess the goods or services promised in a contract with a [customer](https://asc.understandingaccounting.org/glossary/c/#customer "A party that has contracted with an entity to obtain goods or services that are an output of the entity's ordinary activities in exchange for consideration.") and shall identify as a [performance obligation](https://asc.understandingaccounting.org/glossary/p/#performance-obligation "A promise in a contract with a customer to transfer to the customer either: A good or service (or a bundle of goods or services) that is distinct A series of distinct goods or services that are substantially the same and that have the same pattern of transfer to the customer.") each promise to transfer to the customer either:** 1. a **A good or service (or a bundle of goods or services) that is distinct** 2. b **A series of distinct goods or services that are substantially the same and that have the same pattern of transfer to the customer (see paragraph [606-10-25-15](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-15)).** ##### [606-10-25-15](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-15) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:03.513Z to 2026-09-09T23:18:03.513Z Record version: sha256:3c60610876c731483b3315c3c0123238b59b28176699dc2443b963afba4d3403 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. A series of distinct goods or services has the same pattern of transfer to the customer if both of the following criteria are met: 1. a Each distinct good or service in the series that the entity promises to transfer to the customer would meet the criteria in paragraph [606-10-25-27](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-27) to be a performance obligation satisfied over time. 2. b In accordance with paragraphs [606-10-25-31 through 25-32](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-31) , the same method would be used to measure the entity's progress toward complete satisfaction of the performance obligation to transfer each distinct good or service in the series to the customer. ##### [606-10-25-16](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-16) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:03.513Z to 2026-09-09T23:18:03.513Z Record version: sha256:57dbd460d8ea6214256f07029b99bd06d535c13a242dd42b88fcdf115b0e1ac0 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. A [contract](https://asc.understandingaccounting.org/glossary/c/#contract "An agreement between two or more parties that creates enforceable rights and obligations.") with a [customer](https://asc.understandingaccounting.org/glossary/c/#customer "A party that has contracted with an entity to obtain goods or services that are an output of the entity's ordinary activities in exchange for consideration.") generally explicitly states the goods or services that an entity promises to transfer to a customer. However, the promised goods and services identified in a contract with a customer may not be limited to the goods or services that are explicitly stated in that contract. This is because a contract with a customer also may include promises that are implied by an entity's customary business practices, published policies, or specific statements if, at the time of entering into the contract, those promises create a reasonable expectation of the customer that the entity will transfer a good or service to the customer. ##### [606-10-25-16A](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-16A) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:03.513Z to 2026-09-09T23:18:03.513Z Record version: sha256:b4dcd4ff5bbe8e4d59a3cf442c93269b5d1f2c4bd5b8f44e26a7fb7ba0511682 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An entity is not required to assess whether promised goods or services are [performance obligations](https://asc.understandingaccounting.org/glossary/p/#performance-obligation "A promise in a contract with a customer to transfer to the customer either: A good or service (or a bundle of goods or services) that is distinct A series of distinct goods or services that are substantially the same and that have the same pattern of transfer to the customer.") if they are immaterial in the context of the contract with the customer. If the revenue related to a performance obligation that includes goods or services that are immaterial in the context of the contract is recognized before those immaterial goods or services are transferred to the customer, then the related costs to transfer those goods or services shall be accrued. ##### [606-10-25-16B](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-16B) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:03.513Z to 2026-09-09T23:18:03.513Z Record version: sha256:d58bb270058bc82ebe77f0093d6536b8c2fd58e0e5aeb4e31176260c117e4116 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An entity shall not apply the guidance in paragraph [606-10-25-16A](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-16A) to a customer option to acquire additional goods or services that provides the customer with a material right, in accordance with paragraphs [606-10-55-41 through 55-45](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-41) . ##### [606-10-25-17](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-17) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:03.513Z to 2026-09-09T23:18:03.513Z Record version: sha256:aa59283c6ff2db3d9826fafc2284b2e7a40d8cbdcc7ed6d0dd408ad7e2a238a4 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Promised goods or services do not include activities that an entity must undertake to fulfill a contract unless those activities transfer a good or service to a customer. For example, a services provider may need to perform various administrative tasks to set up a contract. The performance of those tasks does not transfer a service to the customer as the tasks are performed. Therefore, those setup activities are not promised goods or services in the contract with the customer. ##### [606-10-25-18](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-18) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:03.513Z to 2026-09-09T23:18:03.513Z Record version: sha256:51d46574904e95ba16ae04f09ac8661be849bda4b742be1ccaf0da6a92749bf4 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Depending on the [contract](https://asc.understandingaccounting.org/glossary/c/#contract "An agreement between two or more parties that creates enforceable rights and obligations."), promised goods or services may include, but are not limited to, the following: 1. a Sale of goods produced by an entity (for example, inventory of a manufacturer) 2. b Resale of goods purchased by an entity (for example, merchandise of a retailer) 3. c Resale of rights to goods or services purchased by an entity (for example, a ticket resold by an entity acting as a principal, as described in paragraphs [606-10-55-36 through 55-40](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-36) ) 4. d Performing a contractually agreed-upon task (or tasks) for a [customer](https://asc.understandingaccounting.org/glossary/c/#customer "A party that has contracted with an entity to obtain goods or services that are an output of the entity's ordinary activities in exchange for consideration.") 5. e Providing a service of standing ready to provide goods or services (for example, unspecified updates to software that are provided on a when-and-if-available basis) or of making goods or services available for a customer to use as and when the customer decides 6. f Providing a service of arranging for another party to transfer goods or services to a customer (for example, acting as an agent of another party, as described in paragraphs [606-10-55-36 through 55-40](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-36) ) 7. g Granting rights to goods or services to be provided in the future that a customer can resell or provide to its customer (for example, an entity selling a product to a retailer promises to transfer an additional good or service to an individual who purchases the product from the retailer) 8. h Constructing, manufacturing, or developing an asset on behalf of a customer 9. i Granting licenses (see paragraphs [606-10-55-54 through 55-60](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-54) and paragraphs [606-10-55-62 through 55-65B](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-62)) 10. j Granting options to purchase additional goods or services (when those options provide a customer with a material right, as described in paragraphs [606-10-55-41 through 55-45](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-41) ). ##### [606-10-25-18A](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-18A) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:03.513Z to 2026-09-09T23:18:03.513Z Record version: sha256:5b605adec9a3a49644ed3a4a9225259dba236365493e7380c143820cf77f1e68 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An entity that promises a good to a customer also might perform shipping and handling activities related to that good. If the shipping and handling activities are performed before the customer obtains control of the good (see paragraphs [606-10-25-23 through 25-30](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-23) for guidance on satisfying performance obligations), then the shipping and handling activities are not a promised service to the customer. Rather, shipping and handling are activities to fulfill the entity's promise to transfer the good. ##### [606-10-25-18B](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-18B) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:03.513Z to 2026-09-09T23:18:03.513Z Record version: sha256:e7ada7cd14b5f21c25928f3b0eaba25e51722108290daca5fc12773e37a5b2c0 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If shipping and handling activities are performed after a customer obtains control of the good, then the entity may elect to account for shipping and handling as activities to fulfill the promise to transfer the good. The entity shall apply this accounting policy election consistently to similar types of transactions. An entity that makes this election would not evaluate whether shipping and handling activities are promised services to its customers. If revenue is recognized for the related good before the shipping and handling activities occur, the related costs of those shipping and handling activities shall be accrued. An entity that applies this accounting policy election shall comply with the accounting policy disclosure requirements in paragraphs [235-10-50-1 through 50-6](https://asc.understandingaccounting.org/asc/235/10/#235-10-50-1) . ##### [606-10-25-18C](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-18C) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:03.513Z to 2026-09-09T23:18:03.513Z Record version: sha256:2932d2d6bd24d43bb7e6ab11dd12de095bb822ca566cba86dd42042ba0641672 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. See Subtopic 952-606, Franchisors—Revenue from Contracts with Customers, for additional guidance and a practical expedient for entities within the scope of that guidance that are not public business entities. ##### [606-10-25-19](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-19) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:03.513Z to 2026-09-09T23:18:03.513Z Record version: sha256:2a7a671813d83352eeefc2c2f87b786047d03accab70e20a8e22e84dd4fd1548 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. A good or service that is promised to a customer is distinct if both of the following criteria are met: 1. a The customer can benefit from the good or service either on its own or together with other resources that are readily available to the customer (that is, the good or service is capable of being distinct). 2. b The entity's promise to transfer the good or service to the customer is separately identifiable from other promises in the contract (that is, the promise to transfer the good or service is distinct within the context of the contract). ##### [606-10-25-20](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-20) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:03.513Z to 2026-09-09T23:18:03.513Z Record version: sha256:ffae94c36d68b1cf518ec7da0d4d6b7c6ff7d3e19bfc074d563ccc0900fe47c2 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. A customer can benefit from a good or service in accordance with paragraph [606-10-25-19(a)](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-19) if the good or service could be used, consumed, sold for an amount that is greater than scrap value, or otherwise held in a way that generates economic benefits. For some goods or services, a customer may be able to benefit from a good or service on its own. For other goods or services, a customer may be able to benefit from the good or service only in conjunction with other readily available resources. A readily available resource is a good or service that is sold separately (by the entity or another entity) or a resource that the customer has already obtained from the entity (including goods or services that the entity will have already transferred to the customer under the contract) or from other transactions or events. Various factors may provide evidence that the customer can benefit from a good or service either on its own or in conjunction with other readily available resources. For example, the fact that the entity regularly sells a good or service separately would indicate that a customer can benefit from the good or service on its own or with other readily available resources. ##### [606-10-25-21](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-21) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:03.513Z to 2026-09-09T23:18:03.513Z Record version: sha256:12ebabd0e3baf2c176176abb95bbb16d093be0e6acf5251abf5076951fca3557 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. In assessing whether an entity's promises to transfer goods or services to the customer are separately identifiable in accordance with paragraph [606-10-25-19(b)](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-19), the objective is to determine whether the nature of the promise, within the context of the contract, is to transfer each of those goods or services individually or, instead, to transfer a combined item or items to which the promised goods or services are inputs. Factors that indicate that two or more promises to transfer goods or services to a customer are not separately identifiable include, but are not limited to, the following: 1. a The entity provides a significant service of integrating goods or services with other goods or services promised in the contract into a bundle of goods or services that represent the combined output or outputs for which the customer has contracted. In other words, the entity is using the goods or services as inputs to produce or deliver the combined output or outputs specified by the customer. A combined output or outputs might include more than one phase, element, or unit. 2. b One or more of the goods or services significantly modifies or customizes, or are significantly modified or customized by, one or more of the other goods or services promised in the contract. 3. c The goods or services are highly interdependent or highly interrelated. In other words, each of the goods or services is significantly affected by one or more of the other goods or services in the contract. For example, in some cases, two or more goods or services are significantly affected by each other because the entity would not be able to fulfill its promise by transferring each of the goods or services independently. ##### [606-10-25-22](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-22) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:03.513Z to 2026-09-09T23:18:03.513Z Record version: sha256:40d6761842e3d1d1de5b0a0934ff3b349f42989cae7b7a7028e8139d2d032917 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If a promised good or service is not distinct, an entity shall combine that good or service with other promised goods or services until it identifies a bundle of goods or services that is distinct. In some cases, that would result in the entity accounting for all the goods or services promised in a contract as a single [performance obligation](https://asc.understandingaccounting.org/glossary/p/#performance-obligation "A promise in a contract with a customer to transfer to the customer either: A good or service (or a bundle of goods or services) that is distinct A series of distinct goods or services that are substantially the same and that have the same pattern of transfer to the customer."). #### Satisfaction of Performance Obligations ##### [606-10-25-23](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-23) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:03.513Z to 2026-09-09T23:18:03.513Z Record version: sha256:2af5a5fbbe8479a4c8c3c48fc8e9060415ce5306894b2da449bf43662a7a304c Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. **An entity shall recognize [revenue](https://asc.understandingaccounting.org/glossary/r/#revenue "Inflows or other enhancements of assets of an entity or settlements of its liabilities (or a combination of both) from delivering or producing goods, rendering services, or other activities that constitute the entity's ongoing major or central operations.") when (or as) the entity satisfies a [performance obligation](https://asc.understandingaccounting.org/glossary/p/#performance-obligation "A promise in a contract with a customer to transfer to the customer either: A good or service (or a bundle of goods or services) that is distinct A series of distinct goods or services that are substantially the same and that have the same pattern of transfer to the customer.") by transferring a promised good or service (that is, an asset) to a [customer](https://asc.understandingaccounting.org/glossary/c/#customer "A party that has contracted with an entity to obtain goods or services that are an output of the entity's ordinary activities in exchange for consideration."). An asset is transferred when (or as) the customer obtains control of that asset.** ##### [606-10-25-24](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-24) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:03.513Z to 2026-09-09T23:18:03.513Z Record version: sha256:5ebd3d39b692e02ef4d8c3aed734260f97b9ba9f164366e4d925a0d0583f30af Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. For each performance obligation identified in accordance with paragraphs [606-10-25-14 through 25-22](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-14) , an entity shall determine at contract inception whether it satisfies the performance obligation over time (in accordance with paragraphs [606-10-25-27 through 25-29](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-27) ) or satisfies the performance obligation at a point in time (in accordance with paragraph [606-10-25-30](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-30)). If an entity does not satisfy a performance obligation over time, the performance obligation is satisfied at a point in time. ##### [606-10-25-25](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-25) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:03.513Z to 2026-09-09T23:18:03.513Z Record version: sha256:d10b7064cdde77c2b0e980a929e994abfc2afb1ff23b5a6dbe3632cd920888b4 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Goods and services are assets, even if only momentarily, when they are received and used (as in the case of many services). Control of an asset refers to the ability to direct the use of, and obtain substantially all of the remaining benefits from, the asset. Control includes the ability to prevent other entities from directing the use of, and obtaining the benefits from, an asset. The benefits of an asset are the potential cash flows (inflows or savings in outflows) that can be obtained directly or indirectly in many ways, such as by: 1. a Using the asset to produce goods or provide services (including public services) 2. b Using the asset to enhance the value of other assets 3. c Using the asset to settle liabilities or reduce expenses 4. d Selling or exchanging the asset 5. e Pledging the asset to secure a loan 6. f Holding the asset. ##### [606-10-25-26](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-26) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:03.513Z to 2026-09-09T23:18:03.513Z Record version: sha256:1e8533b6ca7952349f273371a2eb940d3cee9ac6d0c892c16930c088851cbfcc Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. When evaluating whether a customer obtains control of an asset, an entity shall consider any agreement to repurchase the asset (see paragraphs [606-10-55-66 through 55-78](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-66) ). ##### [606-10-25-27](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-27) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:03.513Z to 2026-09-09T23:18:03.513Z Record version: sha256:58186ec89d2f19dd4d461d63f9e28fa330b0f8066ee6cc1163669a4dafef4b32 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An entity transfers control of a good or service over time and, therefore, satisfies a [performance obligation](https://asc.understandingaccounting.org/glossary/p/#performance-obligation "A promise in a contract with a customer to transfer to the customer either: A good or service (or a bundle of goods or services) that is distinct A series of distinct goods or services that are substantially the same and that have the same pattern of transfer to the customer.") and recognizes [revenue](https://asc.understandingaccounting.org/glossary/r/#revenue "Inflows or other enhancements of assets of an entity or settlements of its liabilities (or a combination of both) from delivering or producing goods, rendering services, or other activities that constitute the entity's ongoing major or central operations.") over time, if one of the following criteria is met: 1. a The [customer](https://asc.understandingaccounting.org/glossary/c/#customer "A party that has contracted with an entity to obtain goods or services that are an output of the entity's ordinary activities in exchange for consideration.") simultaneously receives and consumes the benefits provided by the entity's performance as the entity performs (see paragraphs [606-10-55-5 through 55-6](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-5) ). 2. b The entity's performance creates or enhances an asset (for example, work in process) that the customer controls as the asset is created or enhanced (see paragraph [606-10-55-7](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-7)). 3. c The entity's performance does not create an asset with an alternative use to the entity (see paragraph [606-10-25-28](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-28)), and the entity has an enforceable right to payment for performance completed to date (see paragraph [606-10-25-29](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-29)). ##### [606-10-25-28](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-28) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:03.513Z to 2026-09-09T23:18:03.513Z Record version: sha256:58edad7f8310a7f5b1f2c3092cbd38a7c2ee5dd3c865d1050ae2bb7926d4e5a6 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An asset created by an entity's performance does not have an alternative use to an entity if the entity is either restricted contractually from readily directing the asset for another use during the creation or enhancement of that asset or limited practically from readily directing the asset in its completed state for another use. The assessment of whether an asset has an alternative use to the entity is made at contract inception. After contract inception, an entity shall not update the assessment of the alternative use of an asset unless the parties to the [contract](https://asc.understandingaccounting.org/glossary/c/#contract "An agreement between two or more parties that creates enforceable rights and obligations.") approve a contract modification that substantively changes the performance obligation. Paragraphs [606-10-55-8 through 55-10](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-8) provide guidance for assessing whether an asset has an alternative use to an entity. ##### [606-10-25-29](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-29) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:03.513Z to 2026-09-09T23:18:03.513Z Record version: sha256:87d48a516d70a522c957524a1e0691ef9e2874dc978ccb08e11125a72736bef5 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An entity shall consider the terms of the contract, as well as any laws that apply to the contract, when evaluating whether it has an enforceable right to payment for performance completed to date in accordance with paragraph [606-10-25-27(c)](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-27). The right to payment for performance completed to date does not need to be for a fixed amount. However, at all times throughout the duration of the contract, the entity must be entitled to an amount that at least compensates the entity for performance completed to date if the contract is terminated by the customer or another party for reasons other than the entity's failure to perform as promised. Paragraphs [606-10-55-11 through 55-15](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-11) provide guidance for assessing the existence and enforceability of a right to payment and whether an entity's right to payment would entitle the entity to be paid for its performance completed to date. ##### [606-10-25-30](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-30) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:03.513Z to 2026-09-09T23:18:03.513Z Record version: sha256:a76655be816812edb5da2710ba9b86c57dfb95d7ec7897a35a8d1e8a6afb18af Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If a [performance obligation](https://asc.understandingaccounting.org/glossary/p/#performance-obligation "A promise in a contract with a customer to transfer to the customer either: A good or service (or a bundle of goods or services) that is distinct A series of distinct goods or services that are substantially the same and that have the same pattern of transfer to the customer.") is not satisfied over time in accordance with paragraphs [606-10-25-27 through 25-29](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-27) , an entity satisfies the performance obligation at a point in time. To determine the point in time at which a [customer](https://asc.understandingaccounting.org/glossary/c/#customer "A party that has contracted with an entity to obtain goods or services that are an output of the entity's ordinary activities in exchange for consideration.") obtains control of a promised asset and the entity satisfies a performance obligation, the entity shall consider the guidance on control in paragraphs [606-10-25-23 through 25-26](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-23) . In addition, an entity shall consider indicators of the transfer of control, which include, but are not limited to, the following: 1. a The entity has a present right to payment for the asset—If a customer presently is obliged to pay for an asset, then that may indicate that the customer has obtained the ability to direct the use of, and obtain substantially all of the remaining benefits from, the asset in exchange. 2. b The customer has legal title to the asset—Legal title may indicate which party to a [contract](https://asc.understandingaccounting.org/glossary/c/#contract "An agreement between two or more parties that creates enforceable rights and obligations.") has the ability to direct the use of, and obtain substantially all of the remaining benefits from, an asset or to restrict the access of other entities to those benefits. Therefore, the transfer of legal title of an asset may indicate that the customer has obtained control of the asset. If an entity retains legal title solely as protection against the customer's failure to pay, those rights of the entity would not preclude the customer from obtaining control of an asset. 3. c The entity has transferred physical possession of the asset—The customer's physical possession of an asset may indicate that the customer has the ability to direct the use of, and obtain substantially all of the remaining benefits from, the asset or to restrict the access of other entities to those benefits. However, physical possession may not coincide with control of an asset. For example, in some repurchase agreements and in some consignment arrangements, a customer or consignee may have physical possession of an asset that the entity controls. Conversely, in some bill-and-hold arrangements, the entity may have physical possession of an asset that the customer controls. Paragraphs [606-10-55-66 through 55-78](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-66) , [606-10-55-79 through 55-80](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-79) , and [606-10-55-81 through 55-84](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-81) provide guidance on accounting for repurchase agreements, consignment arrangements, and bill-and-hold arrangements, respectively. 4. d The customer has the significant risks and rewards of ownership of the asset—The transfer of the significant risks and rewards of ownership of an asset to the customer may indicate that the customer has obtained the ability to direct the use of, and obtain substantially all of the remaining benefits from, the asset. However, when evaluating the risks and rewards of ownership of a promised asset, an entity shall exclude any risks that give rise to a separate performance obligation in addition to the performance obligation to transfer the asset. For example, an entity may have transferred control of an asset to a customer but not yet satisfied an additional performance obligation to provide maintenance services related to the transferred asset. 5. e The customer has accepted the asset—The customer's acceptance of an asset may indicate that it has obtained the ability to direct the use of, and obtain substantially all of the remaining benefits from, the asset. To evaluate the effect of a contractual customer acceptance clause on when control of an asset is transferred, an entity shall consider the guidance in paragraphs [606-10-55-85 through 55-88](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-85) . ##### [606-10-25-31](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-31) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:03.513Z to 2026-09-09T23:18:03.513Z Record version: sha256:aa1126227b3c0508b33e5a20409f3c402fcbee00a78c350271a0e3f49b526d66 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. For each [performance obligation](https://asc.understandingaccounting.org/glossary/p/#performance-obligation "A promise in a contract with a customer to transfer to the customer either: A good or service (or a bundle of goods or services) that is distinct A series of distinct goods or services that are substantially the same and that have the same pattern of transfer to the customer.") satisfied over time in accordance with paragraphs [606-10-25-27 through 25-29](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-27) , an entity shall recognize [revenue](https://asc.understandingaccounting.org/glossary/r/#revenue "Inflows or other enhancements of assets of an entity or settlements of its liabilities (or a combination of both) from delivering or producing goods, rendering services, or other activities that constitute the entity's ongoing major or central operations.") over time by measuring the progress toward complete satisfaction of that performance obligation. The objective when measuring progress is to depict an entity's performance in transferring control of goods or services promised to a [customer](https://asc.understandingaccounting.org/glossary/c/#customer "A party that has contracted with an entity to obtain goods or services that are an output of the entity's ordinary activities in exchange for consideration.") (that is, the satisfaction of an entity's performance obligation). ##### [606-10-25-32](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-32) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:03.513Z to 2026-09-09T23:18:03.513Z Record version: sha256:750dcf372b40aed4f28f5c727f24fd8c341a979f9923c227dfb9e8d9930b1411 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An entity shall apply a single method of measuring progress for each performance obligation satisfied over time, and the entity shall apply that method consistently to similar performance obligations and in similar circumstances. At the end of each reporting period, an entity shall remeasure its progress toward complete satisfaction of a performance obligation satisfied over time. ##### [606-10-25-33](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-33) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:03.513Z to 2026-09-09T23:18:03.513Z Record version: sha256:709e2c25df8bb859ea6749a792d128a2bc819d35b343a2a07479589e9e121d5a Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Appropriate methods of measuring progress include output methods and input methods. Paragraphs [606-10-55-16 through 55-21](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-16) provide guidance for using output methods and input methods to measure an entity's progress toward complete satisfaction of a performance obligation. In determining the appropriate method for measuring progress, an entity shall consider the nature of the good or service that the entity promised to transfer to the customer. ##### [606-10-25-34](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-34) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:03.513Z to 2026-09-09T23:18:03.513Z Record version: sha256:1c12df6387029ea8ede8aaba1f41bb52202ca7ff8bf1e0419a2cd731b631791f Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. When applying a method for measuring progress, an entity shall exclude from the measure of progress any goods or services for which the entity does not transfer control to a customer. Conversely, an entity shall include in the measure of progress any goods or services for which the entity does transfer control to a customer when satisfying that performance obligation. ##### [606-10-25-35](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-35) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:03.513Z to 2026-09-09T23:18:03.513Z Record version: sha256:4a98950f8493ade5f84d0d6e8911c5900e7e254f93fe3abea15c10a5ed74c1b7 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. As circumstances change over time, an entity shall update its measure of progress to reflect any changes in the outcome of the performance obligation. Such changes to an entity's measure of progress shall be accounted for as a change in accounting estimate in accordance with Subtopic 250-10 on accounting changes and error corrections. ##### [606-10-25-36](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-36) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:03.513Z to 2026-09-09T23:18:03.513Z Record version: sha256:b364a1abb95386f593c5028ff6e205cced5ba887832d80cc56fb541533336af4 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An entity shall recognize revenue for a performance obligation satisfied over time only if the entity can reasonably measure its progress toward complete satisfaction of the performance obligation. An entity would not be able to reasonably measure its progress toward complete satisfaction of a performance obligation if it lacks reliable information that would be required to apply an appropriate method of measuring progress. ##### [606-10-25-37](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-37) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:03.513Z to 2026-09-09T23:18:03.513Z Record version: sha256:1f9b8ecb23781a5473e02b2f0eada39b085644ae305ba552aef193c4e3a5f2b9 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. In some circumstances (for example, in the early stages of a contract), an entity may not be able to reasonably measure the outcome of a performance obligation, but the entity expects to recover the costs incurred in satisfying the performance obligation. In those circumstances, the entity shall recognize revenue only to the extent of the costs incurred until such time that it can reasonably measure the outcome of the performance obligation. Source downloaded (UTC): 2026-09-09T23:18:06.133Z to 2026-09-09T23:18:06.133Z Record version: sha256:23cd610898357cfbb960e96302563c4b4bbb81fff1d6f30840cdc16ef45359fe Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 606-10-32: 32 Measurement [Read section](https://asc.understandingaccounting.org/asc/606/10/#32-measurement) SEC content: no ##### [606-10-32-1](https://asc.understandingaccounting.org/asc/606/10/#606-10-32-1) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:06.133Z to 2026-09-09T23:18:06.133Z Record version: sha256:7375018e99204509c2a09b33341fb86383c8a1e26daf88d415e7cb8bfe59b79f Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. **When (or as) a [performance obligation](https://asc.understandingaccounting.org/glossary/p/#performance-obligation "A promise in a contract with a customer to transfer to the customer either: A good or service (or a bundle of goods or services) that is distinct A series of distinct goods or services that are substantially the same and that have the same pattern of transfer to the customer.") is satisfied, an entity shall recognize as [revenue](https://asc.understandingaccounting.org/glossary/r/#revenue "Inflows or other enhancements of assets of an entity or settlements of its liabilities (or a combination of both) from delivering or producing goods, rendering services, or other activities that constitute the entity's ongoing major or central operations.") the amount of the [transaction price](https://asc.understandingaccounting.org/glossary/t/#transaction-price "The amount of consideration to which an entity expects to be entitled in exchange for transferring promised goods or services to a customer, excluding amounts collected on behalf of third parties.") (which excludes estimates of variable consideration that are constrained in accordance with paragraphs [606-10-32-11 through 32-13](https://asc.understandingaccounting.org/asc/606/10/#606-10-32-11) ) that is allocated to that performance obligation.** #### Determining the Transaction Price ##### [606-10-32-2](https://asc.understandingaccounting.org/asc/606/10/#606-10-32-2) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:06.133Z to 2026-09-09T23:18:06.133Z Record version: sha256:ba3cd80f86ab398c0111c3bd4afc13f804329e916d1e6625815d5387e86814b0 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. **An entity shall consider the terms of the [contract](https://asc.understandingaccounting.org/glossary/c/#contract "An agreement between two or more parties that creates enforceable rights and obligations.") and its customary business practices to determine the [transaction price](https://asc.understandingaccounting.org/glossary/t/#transaction-price "The amount of consideration to which an entity expects to be entitled in exchange for transferring promised goods or services to a customer, excluding amounts collected on behalf of third parties."). The transaction price is the amount of consideration to which an entity expects to be entitled in exchange for transferring promised goods or services to a [customer](https://asc.understandingaccounting.org/glossary/c/#customer "A party that has contracted with an entity to obtain goods or services that are an output of the entity's ordinary activities in exchange for consideration."), excluding amounts collected on behalf of third parties (for example, some sales taxes). The consideration promised in a contract with a customer may include fixed amounts, variable amounts, or both.** ##### [606-10-32-2A](https://asc.understandingaccounting.org/asc/606/10/#606-10-32-2A) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:06.133Z to 2026-09-09T23:18:06.133Z Record version: sha256:9fbc75897b14cdf7d67d1ca7c742be624adb2187289f2647f642f748641f0477 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An entity may make an accounting policy election to exclude from the measurement of the transaction price all taxes assessed by a governmental authority that are both imposed on and concurrent with a specific revenue-producing transaction and collected by the entity from a customer (for example, sales, use, value added, and some excise taxes). Taxes assessed on an entity's total gross receipts or imposed during the inventory procurement process shall be excluded from the scope of the election. An entity that makes this election shall exclude from the transaction price all taxes in the scope of the election and shall comply with the applicable accounting policy guidance, including the disclosure requirements in paragraphs [235-10-50-1 through 50-6](https://asc.understandingaccounting.org/asc/235/10/#235-10-50-1) . ##### [606-10-32-3](https://asc.understandingaccounting.org/asc/606/10/#606-10-32-3) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:06.133Z to 2026-09-09T23:18:06.133Z Record version: sha256:48c1963aea5033e914e1f12a83f607d44b5b1e9302e4c78dd342a50928522b9b Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The nature, timing, and amount of consideration promised by a customer affect the estimate of the transaction price. When determining the transaction price, an entity shall consider the effects of all of the following: 1. a Variable consideration (see paragraphs [606-10-32-5 through 32-10](https://asc.understandingaccounting.org/asc/606/10/#606-10-32-5) and [606-10-32-14](https://asc.understandingaccounting.org/asc/606/10/#606-10-32-14)) 2. b Constraining estimates of variable consideration (see paragraphs [606-10-32-11 through 32-13](https://asc.understandingaccounting.org/asc/606/10/#606-10-32-11) ) 3. c The existence of a significant financing component in the contract (see paragraphs [606-10-32-15 through 32-20](https://asc.understandingaccounting.org/asc/606/10/#606-10-32-15) ) 4. d Noncash consideration (see paragraphs [606-10-32-21 through 32-24](https://asc.understandingaccounting.org/asc/606/10/#606-10-32-21) ) 5. e Consideration payable to a customer (see paragraphs [606-10-32-25 through 32-27](https://asc.understandingaccounting.org/asc/606/10/#606-10-32-25) ). ##### [606-10-32-4](https://asc.understandingaccounting.org/asc/606/10/#606-10-32-4) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:06.133Z to 2026-09-09T23:18:06.133Z Record version: sha256:311485ca7856e2533f59c7fbd2485c68417cc120a77422e8bd5c882cdc04f69a Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. For the purpose of determining the transaction price, an entity shall assume that the goods or services will be transferred to the customer as promised in accordance with the existing contract and that the contract will not be cancelled, renewed, or modified. ##### [606-10-32-5](https://asc.understandingaccounting.org/asc/606/10/#606-10-32-5) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:06.133Z to 2026-09-09T23:18:06.133Z Record version: sha256:52482635acfb5b144d29e1109d6ed5cf8cae94850e38b184e238bb307273f15a Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If the consideration promised in a [contract](https://asc.understandingaccounting.org/glossary/c/#contract "An agreement between two or more parties that creates enforceable rights and obligations.") includes a variable amount, an entity shall estimate the amount of consideration to which the entity will be entitled in exchange for transferring the promised goods or services to a [customer](https://asc.understandingaccounting.org/glossary/c/#customer "A party that has contracted with an entity to obtain goods or services that are an output of the entity's ordinary activities in exchange for consideration."). ##### [606-10-32-6](https://asc.understandingaccounting.org/asc/606/10/#606-10-32-6) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:06.133Z to 2026-09-09T23:18:06.133Z Record version: sha256:b188f02e3f1638f21be5d654b329e3342e87a170d65efa15daa942d209def6c9 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An amount of consideration can vary because of discounts, rebates, refunds, credits, price concessions, incentives, performance bonuses, penalties, or other similar items. The promised consideration also can vary if an entity's entitlement to the consideration is contingent on the occurrence or nonoccurrence of a future event. For example, an amount of consideration would be variable if either a product was sold with a right of return or a fixed amount is promised as a performance bonus on achievement of a specified milestone. ##### [606-10-32-7](https://asc.understandingaccounting.org/asc/606/10/#606-10-32-7) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:06.133Z to 2026-09-09T23:18:06.133Z Record version: sha256:3bdb00aca49b71cd20dcf967b72256c3d5c097d5ae13f2a4cd790de689cf2a31 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The variability relating to the consideration promised by a customer may be explicitly stated in the contract. In addition to the terms of the contract, the promised consideration is variable if either of the following circumstances exists: 1. a The customer has a valid expectation arising from an entity's customary business practices, published policies, or specific statements that the entity will accept an amount of consideration that is less than the price stated in the contract. That is, it is expected that the entity will offer a price concession. Depending on the jurisdiction, industry, or customer this offer may be referred to as a discount, rebate, refund, or credit. 2. b Other facts and circumstances indicate that the entity's intention, when entering into the contract with the customer, is to offer a price concession to the customer. ##### [606-10-32-8](https://asc.understandingaccounting.org/asc/606/10/#606-10-32-8) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:06.133Z to 2026-09-09T23:18:06.133Z Record version: sha256:0d15d40524804e593c6d89d032a461a2e86152151db937f1b90f226d010fdeca Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An entity shall estimate an amount of variable consideration by using either of the following methods, depending on which method the entity expects to better predict the amount of consideration to which it will be entitled: 1. a The expected value—The expected value is the sum of probability-weighted amounts in a range of possible consideration amounts. An expected value may be an appropriate estimate of the amount of variable consideration if an entity has a large number of contracts with similar characteristics. 2. b The most likely amount—The most likely amount is the single most likely amount in a range of possible consideration amounts (that is, the single most likely outcome of the contract). The most likely amount may be an appropriate estimate of the amount of variable consideration if the contract has only two possible outcomes (for example, an entity either achieves a performance bonus or does not). ##### [606-10-32-9](https://asc.understandingaccounting.org/asc/606/10/#606-10-32-9) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:06.133Z to 2026-09-09T23:18:06.133Z Record version: sha256:01a3b41146c8be3369d89632b7610d48b3d5de8170db89b43bf6e7cd366ea877 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An entity shall apply one method consistently throughout the contract when estimating the effect of an uncertainty on an amount of variable consideration to which the entity will be entitled. In addition, an entity shall consider all the information (historical, current, and forecast) that is reasonably available to the entity and shall identify a reasonable number of possible consideration amounts. The information that an entity uses to estimate the amount of variable consideration typically would be similar to the information that the entity's management uses during the bid-and-proposal process and in establishing prices for promised goods or services. ##### [606-10-32-10](https://asc.understandingaccounting.org/asc/606/10/#606-10-32-10) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:06.133Z to 2026-09-09T23:18:06.133Z Record version: sha256:19834ebeafdeb9dbb8adaae98c85391227e08e6c67e2fb17612fbc8fbe660c05 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An entity shall recognize a refund liability if the entity receives consideration from a customer and expects to refund some or all of that consideration to the customer. A refund liability is measured at the amount of consideration received (or receivable) for which the entity does not expect to be entitled (that is, amounts not included in the [transaction price](https://asc.understandingaccounting.org/glossary/t/#transaction-price "The amount of consideration to which an entity expects to be entitled in exchange for transferring promised goods or services to a customer, excluding amounts collected on behalf of third parties.")). The refund liability (and corresponding change in the transaction price and, therefore, the [contract liability](https://asc.understandingaccounting.org/glossary/c/#contract-liability "An entity's obligation to transfer goods or services to a customer for which the entity has received consideration (or the amount is due) from the customer.")) shall be updated at the end of each reporting period for changes in circumstances. To account for a refund liability relating to a sale with a right of return, an entity shall apply the guidance in paragraphs [606-10-55-22 through 55-29](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-22) . ##### [606-10-32-11](https://asc.understandingaccounting.org/asc/606/10/#606-10-32-11) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:06.133Z to 2026-09-09T23:18:06.133Z Record version: sha256:ae5088ed15b67c5f9e758dc362ede6c1212d08172feaaaf9f99e6362f9accf68 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An entity shall include in the transaction price some or all of an amount of variable consideration estimated in accordance with paragraph [606-10-32-8](https://asc.understandingaccounting.org/asc/606/10/#606-10-32-8) only to the extent that it is [probable](https://asc.understandingaccounting.org/glossary/p/#probable "The future event or events are likely to occur.") that a significant reversal in the amount of cumulative [revenue](https://asc.understandingaccounting.org/glossary/r/#revenue "Inflows or other enhancements of assets of an entity or settlements of its liabilities (or a combination of both) from delivering or producing goods, rendering services, or other activities that constitute the entity's ongoing major or central operations.") recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved. ##### [606-10-32-12](https://asc.understandingaccounting.org/asc/606/10/#606-10-32-12) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:06.133Z to 2026-09-09T23:18:06.133Z Record version: sha256:cbc5e349b04a28f6121d6749daaa8bb6223f345981cb05b1893968caa2ad505e Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. In assessing whether it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur once the uncertainty related to the variable consideration is subsequently resolved, an entity shall consider both the likelihood and the magnitude of the revenue reversal. Factors that could increase the likelihood or the magnitude of a revenue reversal include, but are not limited to, any of the following: 1. a The amount of consideration is highly susceptible to factors outside the entity's influence. Those factors may include volatility in a market, the judgment or actions of third parties, weather conditions, and a high risk of obsolescence of the promised good or service. 2. b The uncertainty about the amount of consideration is not expected to be resolved for a long period of time. 3. c The entity's experience (or other evidence) with similar types of contracts is limited, or that experience (or other evidence) has limited predictive value. 4. d The entity has a practice of either offering a broad range of price concessions or changing the payment terms and conditions of similar contracts in similar circumstances. 5. e The contract has a large number and broad range of possible consideration amounts. ##### [606-10-32-13](https://asc.understandingaccounting.org/asc/606/10/#606-10-32-13) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:06.133Z to 2026-09-09T23:18:06.133Z Record version: sha256:ebe3f9601b0e29411526d6ce6880b766f25f9108d987eb2160300b218dd27048 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An entity shall apply paragraph [606-10-55-65](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-65) to account for consideration in the form of a sales-based or usage-based royalty that is promised in exchange for a license of intellectual property. ##### [606-10-32-14](https://asc.understandingaccounting.org/asc/606/10/#606-10-32-14) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:06.133Z to 2026-09-09T23:18:06.133Z Record version: sha256:f954fe066ebde6c68e9c8c827815f2092e2e102b96efb774ca072b3b657f2979 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. At the end of each reporting period, an entity shall update the estimated transaction price (including updating its assessment of whether an estimate of variable consideration is constrained) to represent faithfully the circumstances present at the end of the reporting period and the changes in circumstances during the reporting period. The entity shall account for changes in the transaction price in accordance with paragraphs [606-10-32-42 through 32-45](https://asc.understandingaccounting.org/asc/606/10/#606-10-32-42) . ##### [606-10-32-15](https://asc.understandingaccounting.org/asc/606/10/#606-10-32-15) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:06.133Z to 2026-09-09T23:18:06.133Z Record version: sha256:e92eac8ba9b7d7e29cd2fb3902afb2efcf26265fd6d3234c3813f4092db48be2 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. In determining the transaction price, an entity shall adjust the promised amount of consideration for the effects of the time value of money if the timing of payments agreed to by the parties to the [contract](https://asc.understandingaccounting.org/glossary/c/#contract "An agreement between two or more parties that creates enforceable rights and obligations.") (either explicitly or implicitly) provides the [customer](https://asc.understandingaccounting.org/glossary/c/#customer "A party that has contracted with an entity to obtain goods or services that are an output of the entity's ordinary activities in exchange for consideration.") or the entity with a significant benefit of financing the transfer of goods or services to the customer. In those circumstances, the contract contains a significant financing component. A significant financing component may exist regardless of whether the promise of financing is explicitly stated in the contract or implied by the payment terms agreed to by the parties to the contract. ##### [606-10-32-16](https://asc.understandingaccounting.org/asc/606/10/#606-10-32-16) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:06.133Z to 2026-09-09T23:18:06.133Z Record version: sha256:b9a9e9709dfebc59c38bb8e867d075e3abb0d7221db2914d0a448406e8c1d59c Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The objective when adjusting the promised amount of consideration for a significant financing component is for an entity to recognize [revenue](https://asc.understandingaccounting.org/glossary/r/#revenue "Inflows or other enhancements of assets of an entity or settlements of its liabilities (or a combination of both) from delivering or producing goods, rendering services, or other activities that constitute the entity's ongoing major or central operations.") at an amount that reflects the price that a customer would have paid for the promised goods or services if the customer had paid cash for those goods or services when (or as) they transfer to the customer (that is, the cash selling price). An entity shall consider all relevant facts and circumstances in assessing whether a contract contains a financing component and whether that financing component is significant to the contract, including both of the following: 1. a The difference, if any, between the amount of promised consideration and the cash selling price of the promised goods or services 2. b The combined effect of both of the following: 1. 1 The expected length of time between when the entity transfers the promised goods or services to the customer and when the customer pays for those goods or services 2. 2 The prevailing interest rates in the relevant market. ##### [606-10-32-17](https://asc.understandingaccounting.org/asc/606/10/#606-10-32-17) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:06.133Z to 2026-09-09T23:18:06.133Z Record version: sha256:69f8e45c2e2dc91286c99ae524853d697795feea278c9ed1cf24418a46b78867 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Notwithstanding the assessment in paragraph [606-10-32-16](https://asc.understandingaccounting.org/asc/606/10/#606-10-32-16), a contract with a customer would not have a significant financing component if any of the following factors exist: 1. a The customer paid for the goods or services in advance, and the timing of the transfer of those goods or services is at the discretion of the customer. 2. b A substantial amount of the consideration promised by the customer is variable, and the amount or timing of that consideration varies on the basis of the occurrence or nonoccurrence of a future event that is not substantially within the control of the customer or the entity (for example, if the consideration is a sales-based royalty). 3. c The difference between the promised consideration and the cash selling price of the good or service (as described in paragraph [606-10-32-16](https://asc.understandingaccounting.org/asc/606/10/#606-10-32-16)) arises for reasons other than the provision of finance to either the customer or the entity, and the difference between those amounts is proportional to the reason for the difference. For example, the payment terms might provide the entity or the customer with protection from the other party failing to adequately complete some or all of its obligations under the contract. ##### [606-10-32-18](https://asc.understandingaccounting.org/asc/606/10/#606-10-32-18) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:06.133Z to 2026-09-09T23:18:06.133Z Record version: sha256:d865ef3a30ab10ec1278f97f363e645c793dffe35457d55710dfbee1ae9b3b1f Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. As a practical expedient, an entity need not adjust the promised amount of consideration for the effects of a significant financing component if the entity expects, at contract inception, that the period between when the entity transfers a promised good or service to a customer and when the customer pays for that good or service will be one year or less. ##### [606-10-32-19](https://asc.understandingaccounting.org/asc/606/10/#606-10-32-19) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:06.133Z to 2026-09-09T23:18:06.133Z Record version: sha256:e93afa3fbbe028e56ce6be1eeaa15216a9c8d31b0120f561b68eccdb5e472ace Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. To meet the objective in paragraph [606-10-32-16](https://asc.understandingaccounting.org/asc/606/10/#606-10-32-16) when adjusting the promised amount of consideration for a significant financing component, an entity shall use the discount rate that would be reflected in a separate financing transaction between the entity and its customer at contract inception. That rate would reflect the credit characteristics of the party receiving financing in the contract, as well as any collateral or security provided by the customer or the entity, including assets transferred in the contract. An entity may be able to determine that rate by identifying the rate that discounts the nominal amount of the promised consideration to the price that the customer would pay in cash for the goods or services when (or as) they transfer to the customer. After contract inception, an entity shall not update the discount rate for changes in interest rates or other circumstances (such as a change in the assessment of the customer's credit risk). ##### [606-10-32-20](https://asc.understandingaccounting.org/asc/606/10/#606-10-32-20) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:06.133Z to 2026-09-09T23:18:06.133Z Record version: sha256:ca75c6fc1929e4d9922109f67cfd12338784f32ce3071c924b3ba7d9a2173179 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An entity shall present the effects of financing (interest income or interest expense) separately from revenue from contracts with customers in the statement of comprehensive income (statement of activities). Interest income or interest expense is recognized only to the extent that a [contract asset](https://asc.understandingaccounting.org/glossary/c/#contract-asset "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).") (or receivable) or a [contract liability](https://asc.understandingaccounting.org/glossary/c/#contract-liability "An entity's obligation to transfer goods or services to a customer for which the entity has received consideration (or the amount is due) from the customer.") is recognized in accounting for a contract with a customer. In accounting for the effects of the time value of money, an entity also shall consider the subsequent measurement guidance in Subtopic 835-30, specifically the guidance in paragraphs [835-30-45-1A through 45-3](https://asc.understandingaccounting.org/asc/835/30/#835-30-45-1A) on presentation of the discount and premium in the financial statements and the guidance in paragraphs [835-30-55-2 through 55-3](https://asc.understandingaccounting.org/asc/835/30/#835-30-55-2) on the application of the interest method. ##### [606-10-32-21](https://asc.understandingaccounting.org/asc/606/10/#606-10-32-21) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:06.133Z to 2026-09-09T23:18:06.133Z Record version: sha256:c273d8d9f5589833a825ed013d205a238edd3d94856cdc998f95d24dfdcbae27 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. To determine the [transaction price](https://asc.understandingaccounting.org/glossary/t/#transaction-price "The amount of consideration to which an entity expects to be entitled in exchange for transferring promised goods or services to a customer, excluding amounts collected on behalf of third parties.") for [contracts](https://asc.understandingaccounting.org/glossary/c/#contract "An agreement between two or more parties that creates enforceable rights and obligations.") in which a [customer](https://asc.understandingaccounting.org/glossary/c/#customer "A party that has contracted with an entity to obtain goods or services that are an output of the entity's ordinary activities in exchange for consideration.") promises consideration in a form other than cash, an entity shall measure the estimated fair value of the noncash consideration at contract inception (that is, the date at which the criteria in paragraph [606-10-25-1](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-1) are met). ##### [606-10-32-22](https://asc.understandingaccounting.org/asc/606/10/#606-10-32-22) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:06.133Z to 2026-09-09T23:18:06.133Z Record version: sha256:9385f59858398ad9231f522a64b30d19a4d50145bd59d34f78f5c848eb4c4b75 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If an entity cannot reasonably estimate the fair value of the noncash consideration, the entity shall measure the consideration indirectly by reference to the [standalone selling price](https://asc.understandingaccounting.org/glossary/s/#standalone-selling-price "The price at which an entity would sell a promised good or service separately to a customer.") of the goods or services promised to the customer (or class of customer) in exchange for the consideration. ##### [606-10-32-23](https://asc.understandingaccounting.org/asc/606/10/#606-10-32-23) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:06.133Z to 2026-09-09T23:18:06.133Z Record version: sha256:e591d97871d7334a97b3f026fcd63293c9221932bdd0984c7f377c5dd38cd1d0 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The fair value of the noncash consideration may vary after contract inception because of the form of the consideration (for example, a change in the price of a share to which an entity is entitled to receive from a customer). Changes in the fair value of noncash consideration after contract inception that are due to the form of the consideration are not included in the transaction price. If the fair value of the noncash consideration promised by a customer varies for reasons other than the form of the consideration (for example, the exercise price of a share option changes because of the entity's performance), an entity shall apply the guidance on variable consideration in paragraphs [606-10-32-5 through 32-14](https://asc.understandingaccounting.org/asc/606/10/#606-10-32-5) . If the fair value of the noncash consideration varies because of the form of the consideration and for reasons other than the form of the consideration, an entity shall apply the guidance in paragraphs [606-10-32-5 through 32-14](https://asc.understandingaccounting.org/asc/606/10/#606-10-32-5) on variable consideration only to the variability resulting from reasons other than the form of the consideration. ##### [606-10-32-24](https://asc.understandingaccounting.org/asc/606/10/#606-10-32-24) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:06.133Z to 2026-09-09T23:18:06.133Z Record version: sha256:1887777ad641baada060fdfd05305c326b53d4e134b4ee9d6de88ba20ffa4473 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If a customer contributes goods or services (for example, materials, equipment, or labor) to facilitate an entity's fulfillment of the contract, the entity shall assess whether it obtains control of those contributed goods or services. If so, the entity shall account for the contributed goods or services as noncash consideration received from the customer. ##### [606-10-32-25](https://asc.understandingaccounting.org/asc/606/10/#606-10-32-25) Pending content: yes Source downloaded (UTC): 2026-09-09T23:18:06.133Z to 2026-09-09T23:18:06.133Z Record version: sha256:16324fabc827c366aeef60670bf2f27e6f869b8819c8223a66b774c4b80cd96b Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Consideration payable to a [customer](https://asc.understandingaccounting.org/glossary/c/#customer "A party that has contracted with an entity to obtain goods or services that are an output of the entity's ordinary activities in exchange for consideration.") includes: 1. a Cash amounts that an entity pays, or expects to pay, to the customer (or to other parties that purchase the entity's goods or services from the customer) 2. b Credit or other items (for example, a coupon or voucher) that can be applied against amounts owed to the entity (or to other parties that purchase the entity's goods or services from the customer) 3. c Equity instruments (liability or equity classified) granted in conjunction with selling goods or services (for example, shares, share options, or other equity instruments). An entity shall account for consideration payable to a customer as a reduction of the [transaction price](https://asc.understandingaccounting.org/glossary/t/#transaction-price "The amount of consideration to which an entity expects to be entitled in exchange for transferring promised goods or services to a customer, excluding amounts collected on behalf of third parties.") and, therefore, of [revenue](https://asc.understandingaccounting.org/glossary/r/#revenue "Inflows or other enhancements of assets of an entity or settlements of its liabilities (or a combination of both) from delivering or producing goods, rendering services, or other activities that constitute the entity's ongoing major or central operations.") unless the payment to the customer is in exchange for a distinct good or service (as described in paragraphs [606-10-25-18 through 25-22](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-18) ) that the customer transfers to the entity. If the consideration payable to a customer includes a variable amount, an entity shall estimate the transaction price (including assessing whether the estimate of variable consideration is constrained) in accordance with paragraphs [606-10-32-5 through 32-13](https://asc.understandingaccounting.org/asc/606/10/#606-10-32-5) . Transition date:(P) December 16, 2026; (N) December 16, 2026Transition guidance: [606-10-65-2](https://asc.understandingaccounting.org/asc/606/10/#606-10-65-2)Consideration payable to a [customer](https://asc.understandingaccounting.org/glossary/c/#customer "A party that has contracted with an entity to obtain goods or services that are an output of the entity's ordinary activities in exchange for consideration.") includes: 1. a Cash amounts that an entity pays, or expects to pay, to the customer (or to other parties that purchase the entity's goods or services from the customer) 2. b Credit or other items (for example, a coupon or voucher) that can be applied against amounts owed to the entity (or to other parties that purchase the entity's goods or services from the customer) 3. c Share-based consideration (liability or equity classified) granted to the customer (or to other parties that purchase the grantor’s goods or services from the customer) in conjunction with selling goods or services. Share-based consideration encompasses the same instruments as [share-based payment arrangements](https://asc.understandingaccounting.org/glossary/s/#share-based-payment-arrangements "An arrangement under which either of the following conditions is met: One or more suppliers of goods or services (including employees) receive awards of equity shares, equity share options, or other equity instruments. The entity incurs liabilities to suppliers that meet either of the following conditions: The amounts are based, at least in part, on the price of the entity's shares or other equity instruments. (The phrase at least in part is used because an award may be indexed to both the price of the entity's shares and something other than either the price of the entity's shares or a market, performance, or service condition.) The awards require or may require settlement by issuance of the entity's shares. The term shares includes various forms of ownership interest that may not take the legal form of securities (for example, partnership interests), as well as other interests, including those that are liabilities in substance but not in form. Equity shares refers only to shares that are accounted for as equity. Also called share-based compensation arrangements.") (for example, shares, cash-settled stock appreciation rights, share options and warrants, or other equity instruments), but the grantee (as a customer) need not be a supplier of goods or services to the grantor. An entity shall account for consideration payable to a customer as a reduction of the [transaction price](https://asc.understandingaccounting.org/glossary/t/#transaction-price "The amount of consideration to which an entity expects to be entitled in exchange for transferring promised goods or services to a customer, excluding amounts collected on behalf of third parties.") and, therefore, of [revenue](https://asc.understandingaccounting.org/glossary/r/#revenue "Inflows or other enhancements of assets of an entity or settlements of its liabilities (or a combination of both) from delivering or producing goods, rendering services, or other activities that constitute the entity's ongoing major or central operations.") unless the payment to the customer is in exchange for a distinct good or service (as described in paragraphs [606-10-25-18 through 25-22](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-18) ) that the customer transfers to the entity. If the consideration payable to a customer (other than share-based consideration) includes a variable amount, an entity shall estimate the transaction price (including assessing whether the estimate of variable consideration is constrained) in accordance with paragraphs [606-10-32-5 through 32-13](https://asc.understandingaccounting.org/asc/606/10/#606-10-32-5) . See paragraph [606-10-32-25A](https://asc.understandingaccounting.org/asc/606/10/#606-10-32-25A) for guidance applicable to share-based consideration payable to a customer. ##### [606-10-32-25A](https://asc.understandingaccounting.org/asc/606/10/#606-10-32-25A) Pending content: yes Source downloaded (UTC): 2026-09-09T23:18:06.133Z to 2026-09-09T23:18:06.133Z Record version: sha256:796a8f64ede7638b476e45fee769589dadf5af5371c7f3beb8f70dc7efe0e386 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Equity instruments granted by an entity in conjunction with selling goods or services shall be measured and classified under Topic 718 on stock compensation. The equity instrument shall be measured at the [grant date](https://asc.understandingaccounting.org/glossary/g/#grant-date "The date at which a grantor and a grantee reach a mutual understanding of the key terms and conditions of a share-based payment award. The grantor becomes contingently obligated on the grant date to issue equity instruments or transfer assets to a grantee who delivers goods or renders services or purchases goods or services as a customer. Awards made under an arrangement that is subject to shareholder approval are not deemed to be granted until that approval is obtained unless approval is essentially a formality (or perfunctory), for example, if management and the members of the board of directors control enough votes to approve the arrangement. Similarly, individual awards that are subject to approval by the board of directors, management, or both are not deemed to be granted until all such approvals are obtained. The grant date for an award of equity instruments is the date that a grantee begins to benefit from, or be adversely affected by, subsequent changes in the price of the grantor's equity shares. Paragraph 718-10-25-5 provides guidance on determining the grant date. See Service Inception Date.") in accordance with Topic 718 (for both equity-classified and liability-classified share-based payment awards). Changes in the measurement of the equity instrument (through the application of Topic 718) after the grant date that are due to the form of the consideration shall not be included in the transaction price. Any changes due to the form of the consideration shall be reflected elsewhere in the grantor's income statement. See paragraphs [606-10-55-88A through 55-88B](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-88A) for implementation guidance on equity instruments granted as consideration payable to a customer. Transition date:(P) December 16, 2026; (N) December 16, 2026Transition guidance: [606-10-65-2](https://asc.understandingaccounting.org/asc/606/10/#606-10-65-2)Share-based consideration granted by an entity in conjunction with selling goods or services shall be measured and classified under Topic 718 on stock compensation. The share-based consideration shall be measured at the [grant date](https://asc.understandingaccounting.org/glossary/g/#grant-date "The date at which a grantor and a grantee reach a mutual understanding of the key terms and conditions of a share-based payment award. The grantor becomes contingently obligated on the grant date to issue equity instruments or transfer assets to a grantee who delivers goods or renders services or purchases goods or services as a customer. Awards made under an arrangement that is subject to shareholder approval are not deemed to be granted until that approval is obtained unless approval is essentially a formality (or perfunctory), for example, if management and the members of the board of directors control enough votes to approve the arrangement. Similarly, individual awards that are subject to approval by the board of directors, management, or both are not deemed to be granted until all such approvals are obtained. The grant date for an award of equity instruments is the date that a grantee begins to benefit from, or be adversely affected by, subsequent changes in the price of the grantor's equity shares. Paragraph 718-10-25-5 provides guidance on determining the grant date. See Service Inception Date.") in accordance with Topic 718 (for both equity-classified and liability-classified awards). Changes in the measurement of the share-based consideration (through the application of Topic 718) after the grant date that are due to the form of the consideration shall not be included in the transaction price. Any changes due to the form of the consideration shall be reflected elsewhere in the grantor's income statement. See paragraphs [606-10-55-88A through 55-88C](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-88A) for implementation guidance on share-based consideration payable to a customer. ##### [606-10-32-26](https://asc.understandingaccounting.org/asc/606/10/#606-10-32-26) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:06.133Z to 2026-09-09T23:18:06.133Z Record version: sha256:4f216d2127f4a0ff4827e4eb82aa3be09cc3e30f74c18144dc4170ab0da0f5e8 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If consideration payable to a customer is a payment for a distinct good or service from the customer, then an entity shall account for the purchase of the good or service in the same way that it accounts for other purchases from suppliers. If the amount of consideration payable to the customer exceeds the fair value of the distinct good or service that the entity receives from the customer, then the entity shall account for such an excess as a reduction of the transaction price. If the entity cannot reasonably estimate the fair value of the good or service received from the customer, it shall account for all of the consideration payable to the customer as a reduction of the transaction price. ##### [606-10-32-27](https://asc.understandingaccounting.org/asc/606/10/#606-10-32-27) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:06.133Z to 2026-09-09T23:18:06.133Z Record version: sha256:eeec240ed74fe4d63cf956e76b9305d799851301f1fa68e1c147d61ffcdde6a4 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Accordingly, if consideration payable to a customer is accounted for as a reduction of the transaction price, an entity shall recognize the reduction of revenue when (or as) the later of either of the following events occurs: 1. a The entity recognizes revenue for the transfer of the related goods or services to the customer. 2. b The entity pays or promises to pay the consideration (even if the payment is conditional on a future event). That promise might be implied by the entity's customary business practices. #### Allocating the Transaction Price to Performance Obligations ##### [606-10-32-28](https://asc.understandingaccounting.org/asc/606/10/#606-10-32-28) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:06.133Z to 2026-09-09T23:18:06.133Z Record version: sha256:c13e80c309c7f0879460ba1e109fa79f6a711c977b39da7d71d5b3a30b8b3498 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. **The objective when allocating the [transaction price](https://asc.understandingaccounting.org/glossary/t/#transaction-price "The amount of consideration to which an entity expects to be entitled in exchange for transferring promised goods or services to a customer, excluding amounts collected on behalf of third parties.") is for an entity to allocate the transaction price to each [performance obligation](https://asc.understandingaccounting.org/glossary/p/#performance-obligation "A promise in a contract with a customer to transfer to the customer either: A good or service (or a bundle of goods or services) that is distinct A series of distinct goods or services that are substantially the same and that have the same pattern of transfer to the customer.") (or distinct good or service) in an amount that depicts the amount of consideration to which the entity expects to be entitled in exchange for transferring the promised goods or services to the [customer](https://asc.understandingaccounting.org/glossary/c/#customer "A party that has contracted with an entity to obtain goods or services that are an output of the entity's ordinary activities in exchange for consideration.").** ##### [606-10-32-29](https://asc.understandingaccounting.org/asc/606/10/#606-10-32-29) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:06.133Z to 2026-09-09T23:18:06.133Z Record version: sha256:d86a22d79c2822673e39da93c80b097d14ff4a0937da9cc867fa43cd17b4ed66 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. To meet the allocation objective, an entity shall allocate the transaction price to each performance obligation identified in the [contract](https://asc.understandingaccounting.org/glossary/c/#contract "An agreement between two or more parties that creates enforceable rights and obligations.") on a relative [standalone selling price](https://asc.understandingaccounting.org/glossary/s/#standalone-selling-price "The price at which an entity would sell a promised good or service separately to a customer.") basis in accordance with paragraphs [606-10-32-31 through 32-35](https://asc.understandingaccounting.org/asc/606/10/#606-10-32-31) , except as specified in paragraphs [606-10-32-36 through 32-38](https://asc.understandingaccounting.org/asc/606/10/#606-10-32-36) (for allocating discounts) and paragraphs [606-10-32-39 through 32-41](https://asc.understandingaccounting.org/asc/606/10/#606-10-32-39) (for allocating consideration that includes variable amounts). ##### [606-10-32-30](https://asc.understandingaccounting.org/asc/606/10/#606-10-32-30) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:06.133Z to 2026-09-09T23:18:06.133Z Record version: sha256:efd2f0dda508c629d9e7bb630f021a000dd52ffb962b1dd89d94c5285deff6d9 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Paragraphs [606-10-32-31 through 32-41](https://asc.understandingaccounting.org/asc/606/10/#606-10-32-31) do not apply if a contract has only one performance obligation. However, paragraphs [606-10-32-39 through 32-41](https://asc.understandingaccounting.org/asc/606/10/#606-10-32-39) may apply if an entity promises to transfer a series of distinct goods or services identified as a single performance obligation in accordance with paragraph [606-10-25-14(b)](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-14) and the promised consideration includes variable amounts. ##### [606-10-32-31](https://asc.understandingaccounting.org/asc/606/10/#606-10-32-31) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:06.133Z to 2026-09-09T23:18:06.133Z Record version: sha256:7016366b7d980549e5e4507b4e54bc904568b1478b0c54a8feb8bff8d93c4882 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. To allocate the [transaction price](https://asc.understandingaccounting.org/glossary/t/#transaction-price "The amount of consideration to which an entity expects to be entitled in exchange for transferring promised goods or services to a customer, excluding amounts collected on behalf of third parties.") to each [performance obligation](https://asc.understandingaccounting.org/glossary/p/#performance-obligation "A promise in a contract with a customer to transfer to the customer either: A good or service (or a bundle of goods or services) that is distinct A series of distinct goods or services that are substantially the same and that have the same pattern of transfer to the customer.") on a relative [standalone selling price](https://asc.understandingaccounting.org/glossary/s/#standalone-selling-price "The price at which an entity would sell a promised good or service separately to a customer.") basis, an entity shall determine the standalone selling price at contract inception of the distinct good or service underlying each performance obligation in the [contract](https://asc.understandingaccounting.org/glossary/c/#contract "An agreement between two or more parties that creates enforceable rights and obligations.") and allocate the transaction price in proportion to those standalone selling prices. ##### [606-10-32-32](https://asc.understandingaccounting.org/asc/606/10/#606-10-32-32) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:06.133Z to 2026-09-09T23:18:06.133Z Record version: sha256:7bbc40fe07683f215b5f89d42a572e6f09d4188d7a06c79a06aaf1cef6eeef96 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The standalone selling price is the price at which an entity would sell a promised good or service separately to a [customer](https://asc.understandingaccounting.org/glossary/c/#customer "A party that has contracted with an entity to obtain goods or services that are an output of the entity's ordinary activities in exchange for consideration."). The best evidence of a standalone selling price is the observable price of a good or service when the entity sells that good or service separately in similar circumstances and to similar customers. A contractually stated price or a list price for a good or service may be (but shall not be presumed to be) the standalone selling price of that good or service. ##### [606-10-32-33](https://asc.understandingaccounting.org/asc/606/10/#606-10-32-33) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:06.133Z to 2026-09-09T23:18:06.133Z Record version: sha256:bd8c8fbba1057b0a88b96c70cd48698547e3157ac39df3a10c6af32ff8b7322e Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If a standalone selling price is not directly observable, an entity shall estimate the standalone selling price at an amount that would result in the allocation of the transaction price meeting the allocation objective in paragraph [606-10-32-28](https://asc.understandingaccounting.org/asc/606/10/#606-10-32-28). When estimating a standalone selling price, an entity shall consider all information (including market conditions, entity-specific factors, and information about the customer or class of customer) that is reasonably available to the entity. In doing so, an entity shall maximize the use of observable inputs and apply estimation methods consistently in similar circumstances. ##### [606-10-32-34](https://asc.understandingaccounting.org/asc/606/10/#606-10-32-34) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:06.133Z to 2026-09-09T23:18:06.133Z Record version: sha256:698990fbfec771dd66a3f6cde5cb142bf54fbf89236cae869f55f79304f569f2 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Suitable methods for estimating the standalone selling price of a good or service include, but are not limited to, the following: 1. a Adjusted market assessment approach—An entity could evaluate the market in which it sells goods or services and estimate the price that a customer in that market would be willing to pay for those goods or services. That approach also might include referring to prices from the entity's competitors for similar goods or services and adjusting those prices as necessary to reflect the entity's costs and margins. 2. b Expected cost plus a margin approach—An entity could forecast its expected costs of satisfying a performance obligation and then add an appropriate margin for that good or service. 3. c Residual approach—An entity may estimate the standalone selling price by reference to the total transaction price less the sum of the observable standalone selling prices of other goods or services promised in the contract. However, an entity may use a residual approach to estimate, in accordance with paragraph [606-10-32-33](https://asc.understandingaccounting.org/asc/606/10/#606-10-32-33), the standalone selling price of a good or service only if one of the following criteria is met: 1. 1 The entity sells the same good or service to different customers (at or near the same time) for a broad range of amounts (that is, the selling price is highly variable because a representative standalone selling price is not discernible from past transactions or other observable evidence). 2. 2 The entity has not yet established a price for that good or service, and the good or service has not previously been sold on a standalone basis (that is, the selling price is uncertain). ##### [606-10-32-35](https://asc.understandingaccounting.org/asc/606/10/#606-10-32-35) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:06.133Z to 2026-09-09T23:18:06.133Z Record version: sha256:1732f5fb295f46995027980fa1269302b53063767fec9c8597c15d6209140e67 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. A combination of methods may need to be used to estimate the standalone selling prices of the goods or services promised in the contract if two or more of those goods or services have highly variable or uncertain standalone selling prices. For example, an entity may use a residual approach to estimate the aggregate standalone selling price for those promised goods or services with highly variable or uncertain standalone selling prices and then use another method to estimate the standalone selling prices of the individual goods or services relative to that estimated aggregate standalone selling price determined by the residual approach. When an entity uses a combination of methods to estimate the standalone selling price of each promised good or service in the contract, the entity shall evaluate whether allocating the transaction price at those estimated standalone selling prices would be consistent with the allocation objective in paragraph [606-10-32-28](https://asc.understandingaccounting.org/asc/606/10/#606-10-32-28) and the guidance on estimating standalone selling prices in paragraph [606-10-32-33](https://asc.understandingaccounting.org/asc/606/10/#606-10-32-33). ##### [606-10-32-36](https://asc.understandingaccounting.org/asc/606/10/#606-10-32-36) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:06.133Z to 2026-09-09T23:18:06.133Z Record version: sha256:e9b39163212fb392748ecdd7a3c94938d496c0e6a5bd72a9511541fb761f17a0 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. A [customer](https://asc.understandingaccounting.org/glossary/c/#customer "A party that has contracted with an entity to obtain goods or services that are an output of the entity's ordinary activities in exchange for consideration.") receives a discount for purchasing a bundle of goods or services if the sum of the [standalone selling prices](https://asc.understandingaccounting.org/glossary/s/#standalone-selling-price "The price at which an entity would sell a promised good or service separately to a customer.") of those promised goods or services in the [contract](https://asc.understandingaccounting.org/glossary/c/#contract "An agreement between two or more parties that creates enforceable rights and obligations.") exceeds the promised consideration in a contract. Except when an entity has observable evidence in accordance with paragraph [606-10-32-37](https://asc.understandingaccounting.org/asc/606/10/#606-10-32-37) that the entire discount relates to only one or more, but not all, [performance obligations](https://asc.understandingaccounting.org/glossary/p/#performance-obligation "A promise in a contract with a customer to transfer to the customer either: A good or service (or a bundle of goods or services) that is distinct A series of distinct goods or services that are substantially the same and that have the same pattern of transfer to the customer.") in a contract, the entity shall allocate a discount proportionately to all performance obligations in the contract. The proportionate allocation of the discount in those circumstances is a consequence of the entity allocating the [transaction price](https://asc.understandingaccounting.org/glossary/t/#transaction-price "The amount of consideration to which an entity expects to be entitled in exchange for transferring promised goods or services to a customer, excluding amounts collected on behalf of third parties.") to each performance obligation on the basis of the relative standalone selling prices of the underlying distinct goods or services. ##### [606-10-32-37](https://asc.understandingaccounting.org/asc/606/10/#606-10-32-37) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:06.133Z to 2026-09-09T23:18:06.133Z Record version: sha256:7b6be9234fca814c37f0f291bb110d73b45c4ac7150e27b520a2a34942610c11 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An entity shall allocate a discount entirely to one or more, but not all, performance obligations in the contract if all of the following criteria are met: 1. a The entity regularly sells each distinct good or service (or each bundle of distinct goods or services) in the contract on a standalone basis. 2. b The entity also regularly sells on a standalone basis a bundle (or bundles) of some of those distinct goods or services at a discount to the standalone selling prices of the goods or services in each bundle. 3. c The discount attributable to each bundle of goods or services described in (b) is substantially the same as the discount in the contract, and an analysis of the goods or services in each bundle provides observable evidence of the performance obligation (or performance obligations) to which the entire discount in the contract belongs. ##### [606-10-32-38](https://asc.understandingaccounting.org/asc/606/10/#606-10-32-38) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:06.133Z to 2026-09-09T23:18:06.133Z Record version: sha256:1c939eb4e8f522bf60afa7f6b40a4ba9fc78043f095d3e8782fa7baf923f50d4 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If a discount is allocated entirely to one or more performance obligations in the contract in accordance with paragraph [606-10-32-37](https://asc.understandingaccounting.org/asc/606/10/#606-10-32-37), an entity shall allocate the discount before using the residual approach to estimate the standalone selling price of a good or service in accordance with paragraph [606-10-32-34(c)](https://asc.understandingaccounting.org/asc/606/10/#606-10-32-34). ##### [606-10-32-39](https://asc.understandingaccounting.org/asc/606/10/#606-10-32-39) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:06.133Z to 2026-09-09T23:18:06.133Z Record version: sha256:a31d7d823b37dd25bb16993e86ee37427f23a577430cd6dc1128ca1e1f9c2809 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Variable consideration that is promised in a [contract](https://asc.understandingaccounting.org/glossary/c/#contract "An agreement between two or more parties that creates enforceable rights and obligations.") may be attributable to the entire contract or to a specific part of the contract, such as either of the following: 1. a One or more, but not all, [performance obligations](https://asc.understandingaccounting.org/glossary/p/#performance-obligation "A promise in a contract with a customer to transfer to the customer either: A good or service (or a bundle of goods or services) that is distinct A series of distinct goods or services that are substantially the same and that have the same pattern of transfer to the customer.") in the contract (for example, a bonus may be contingent on an entity transferring a promised good or service within a specified period of time) 2. b One or more, but not all, distinct goods or services promised in a series of distinct goods or services that forms part of a single performance obligation in accordance with paragraph [606-10-25-14(b)](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-14) (for example, the consideration promised for the second year of a two-year cleaning service contract will increase on the basis of movements in a specified inflation index). ##### [606-10-32-40](https://asc.understandingaccounting.org/asc/606/10/#606-10-32-40) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:06.133Z to 2026-09-09T23:18:06.133Z Record version: sha256:b6c834af525fe3f8cc5f4a4c1388d7092c88833394444266f1a23c7972f51c23 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An entity shall allocate a variable amount (and subsequent changes to that amount) entirely to a performance obligation or to a distinct good or service that forms part of a single performance obligation in accordance with paragraph [606-10-25-14(b)](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-14) if both of the following criteria are met: 1. a The terms of a variable payment relate specifically to the entity's efforts to satisfy the performance obligation or transfer the distinct good or service (or to a specific outcome from satisfying the performance obligation or transferring the distinct good or service). 2. b Allocating the variable amount of consideration entirely to the performance obligation or the distinct good or service is consistent with the allocation objective in paragraph [606-10-32-28](https://asc.understandingaccounting.org/asc/606/10/#606-10-32-28) when considering all of the performance obligations and payment terms in the contract. ##### [606-10-32-41](https://asc.understandingaccounting.org/asc/606/10/#606-10-32-41) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:06.133Z to 2026-09-09T23:18:06.133Z Record version: sha256:1caaff4c532e57fb776dd5a8c87e8c3bfa4582ca03b964ec13d1fe710870d0dc Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The allocation requirements in paragraphs [606-10-32-28 through 32-38](https://asc.understandingaccounting.org/asc/606/10/#606-10-32-28) shall be applied to allocate the remaining amount of the transaction price that does not meet the criteria in paragraph [606-10-32-40](https://asc.understandingaccounting.org/asc/606/10/#606-10-32-40). #### Changes in the Transaction Price ##### [606-10-32-42](https://asc.understandingaccounting.org/asc/606/10/#606-10-32-42) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:06.133Z to 2026-09-09T23:18:06.133Z Record version: sha256:be2b67737c70a1acec2800754cc2b53ecc7dc5b4ea28c789170ebf32297a71a6 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. After contract inception, the [transaction price](https://asc.understandingaccounting.org/glossary/t/#transaction-price "The amount of consideration to which an entity expects to be entitled in exchange for transferring promised goods or services to a customer, excluding amounts collected on behalf of third parties.") can change for various reasons, including the resolution of uncertain events or other changes in circumstances that change the amount of consideration to which an entity expects to be entitled in exchange for the promised goods or services. ##### [606-10-32-43](https://asc.understandingaccounting.org/asc/606/10/#606-10-32-43) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:06.133Z to 2026-09-09T23:18:06.133Z Record version: sha256:75451c07ba4fc18e0af9a2417e5e49fb768384811514e82b8cab05c317fe3590 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An entity shall allocate to the [performance obligations](https://asc.understandingaccounting.org/glossary/p/#performance-obligation "A promise in a contract with a customer to transfer to the customer either: A good or service (or a bundle of goods or services) that is distinct A series of distinct goods or services that are substantially the same and that have the same pattern of transfer to the customer.") in the contract any subsequent changes in the transaction price on the same basis as at contract inception. Consequently, an entity shall not reallocate the transaction price to reflect changes in [standalone selling prices](https://asc.understandingaccounting.org/glossary/s/#standalone-selling-price "The price at which an entity would sell a promised good or service separately to a customer.") after contract inception. Amounts allocated to a satisfied performance obligation shall be recognized as [revenue](https://asc.understandingaccounting.org/glossary/r/#revenue "Inflows or other enhancements of assets of an entity or settlements of its liabilities (or a combination of both) from delivering or producing goods, rendering services, or other activities that constitute the entity's ongoing major or central operations."), or as a reduction of revenue, in the period in which the transaction price changes. ##### [606-10-32-44](https://asc.understandingaccounting.org/asc/606/10/#606-10-32-44) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:06.133Z to 2026-09-09T23:18:06.133Z Record version: sha256:898e005cb20d7665ac1641480f3e2924d7ec811fb5efab133b63d539840379d7 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An entity shall allocate a change in the transaction price entirely to one or more, but not all, performance obligations or distinct goods or services promised in a series that forms part of a single performance obligation in accordance with paragraph [606-10-25-14(b)](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-14) only if the criteria in paragraph [606-10-32-40](https://asc.understandingaccounting.org/asc/606/10/#606-10-32-40) on allocating variable consideration are met. ##### [606-10-32-45](https://asc.understandingaccounting.org/asc/606/10/#606-10-32-45) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:06.133Z to 2026-09-09T23:18:06.133Z Record version: sha256:cdf1e4a909e7a9ab2466b6fcc36be011fe6be457e686cf0b38a9066563e0302d Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An entity shall account for a change in the transaction price that arises as a result of a contract modification in accordance with paragraphs [606-10-25-10 through 25-13](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-10) . However, for a change in the transaction price that occurs after a contract modification, an entity shall apply paragraphs [606-10-32-42 through 32-44](https://asc.understandingaccounting.org/asc/606/10/#606-10-32-42) to allocate the change in the transaction price in whichever of the following ways is applicable: 1. a An entity shall allocate the change in the transaction price to the performance obligations identified in the contract before the modification if, and to the extent that, the change in the transaction price is attributable to an amount of variable consideration promised before the modification and the modification is accounted for in accordance with paragraph [606-10-25-13(a)](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-13). 2. b In all other cases in which the modification was not accounted for as a separate contract in accordance with paragraph [606-10-25-12](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-12), an entity shall allocate the change in the transaction price to the performance obligations in the modified contract (that is, the performance obligations that were unsatisfied or partially unsatisfied immediately after the modification). Source downloaded (UTC): 2026-09-09T23:18:08.759Z to 2026-09-09T23:18:08.759Z Record version: sha256:a0bcdc8cc3b22f612570b3c1f74661d758cf3eba34b8ae23bfb2e2de047276e7 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 606-10-45: 45 Other Presentation Matters [Read section](https://asc.understandingaccounting.org/asc/606/10/#45-other-presentation-matters) SEC content: no ##### [606-10-45-1](https://asc.understandingaccounting.org/asc/606/10/#606-10-45-1) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:08.759Z to 2026-09-09T23:18:08.759Z Record version: sha256:c876d8c507aba6ffeaa3c6c0a9d3d0943db2af3c703efcacebb091a8e97830db Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. **When either party to a [contract](https://asc.understandingaccounting.org/glossary/c/#contract "An agreement between two or more parties that creates enforceable rights and obligations.") has performed, an entity shall present the contract in the statement of financial position as a [contract asset](https://asc.understandingaccounting.org/glossary/c/#contract-asset "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).") or a [contract liability](https://asc.understandingaccounting.org/glossary/c/#contract-liability "An entity's obligation to transfer goods or services to a customer for which the entity has received consideration (or the amount is due) from the customer."), depending on the relationship between the entity's performance and the customer's payment. An entity shall present any unconditional rights to consideration separately as a receivable.** ##### [606-10-45-2](https://asc.understandingaccounting.org/asc/606/10/#606-10-45-2) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:08.759Z to 2026-09-09T23:18:08.759Z Record version: sha256:40818388ef05d00ea261e04f0a1ff3f3b380d4752877de86c1128bd999e5d67c Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If a [customer](https://asc.understandingaccounting.org/glossary/c/#customer "A party that has contracted with an entity to obtain goods or services that are an output of the entity's ordinary activities in exchange for consideration.") pays consideration, or an entity has a right to an amount of consideration that is unconditional (that is, a receivable), before the entity transfers a good or service to the customer, the entity shall present the contract as a contract liability when the payment is made or the payment is due (whichever is earlier). A contract liability is an entity's obligation to transfer goods or services to a customer for which the entity has received consideration (or an amount of consideration is due) from the customer. ##### [606-10-45-3](https://asc.understandingaccounting.org/asc/606/10/#606-10-45-3) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:08.759Z to 2026-09-09T23:18:08.759Z Record version: sha256:fd4fafcd662eac5aec54aff32ff9cd15475f5edbc120a72c5980ef0e06c27902 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If an entity performs by transferring goods or services to a customer before the customer pays consideration or before payment is due, the entity shall present the contract as a [contract asset](https://asc.understandingaccounting.org/glossary/c/#contract-asset "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)."), excluding any amounts presented as a receivable. A contract asset is an entity's right to consideration in exchange for goods or services that the entity has transferred to a customer. An entity shall assess a contract asset for credit losses in accordance with Subtopic 326-20 on financial instruments measured at amortized cost. A credit loss of a contract asset shall be measured, presented, and disclosed in accordance with Subtopic 326-20 (see also paragraph [606-10-50-4(b)](https://asc.understandingaccounting.org/asc/606/10/#606-10-50-4)). ##### [606-10-45-4](https://asc.understandingaccounting.org/asc/606/10/#606-10-45-4) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:08.759Z to 2026-09-09T23:18:08.759Z Record version: sha256:9fedf0a0b5d72be308d3ca03c1c61774cc3ff96847d9962f131747db3bfac4ed Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. A receivable is an entity's right to consideration that is unconditional. A right to consideration is unconditional if only the passage of time is required before payment of that consideration is due. For example, an entity would recognize a receivable if it has a present right to payment even though that amount may be subject to refund in the future. An entity shall account for a receivable in accordance with Topic 310 and Subtopic 326-20. Upon initial recognition of a receivable from a contract with a customer, any difference between the measurement of the receivable in accordance with Subtopic 326-20 and the corresponding amount of [revenue](https://asc.understandingaccounting.org/glossary/r/#revenue "Inflows or other enhancements of assets of an entity or settlements of its liabilities (or a combination of both) from delivering or producing goods, rendering services, or other activities that constitute the entity's ongoing major or central operations.") recognized shall be presented as a credit loss expense. ##### [606-10-45-5](https://asc.understandingaccounting.org/asc/606/10/#606-10-45-5) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:08.759Z to 2026-09-09T23:18:08.759Z Record version: sha256:2e404692de7e0da559c9771944f62ec95fe903d421cefa5597752eaf706d4f62 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This guidance uses the terms _contract asset_ and _contract liability_ but does not prohibit an entity from using alternative descriptions in the statement of financial position for those items. If an entity uses an alternative description for a contract asset, the entity shall provide sufficient information for a user of the financial statements to distinguish between receivables and contract assets. Source downloaded (UTC): 2026-09-09T23:18:11.428Z to 2026-09-09T23:18:11.428Z Record version: sha256:d38ba6319aa5d74e0fee89a5c1df09c52f4cb4e3e4da81abab48ab4b6adb8835 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 606-10-50: 50 Disclosure [Read section](https://asc.understandingaccounting.org/asc/606/10/#50-disclosure) SEC content: no ##### [606-10-50-1](https://asc.understandingaccounting.org/asc/606/10/#606-10-50-1) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:11.428Z to 2026-09-09T23:18:11.428Z Record version: sha256:0c0fed38ebe0bd9e5b45e167e08b638eb240bd8f14caa1ffd32499abc5245fa8 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. **The objective of the disclosure requirements in this Topic is for an entity to disclose sufficient information to enable users of financial statements to understand the nature, amount, timing, and uncertainty of [revenue](https://asc.understandingaccounting.org/glossary/r/#revenue "Inflows or other enhancements of assets of an entity or settlements of its liabilities (or a combination of both) from delivering or producing goods, rendering services, or other activities that constitute the entity's ongoing major or central operations.") and cash flows arising from [contracts](https://asc.understandingaccounting.org/glossary/c/#contract "An agreement between two or more parties that creates enforceable rights and obligations.") with [customers](https://asc.understandingaccounting.org/glossary/c/#customer "A party that has contracted with an entity to obtain goods or services that are an output of the entity's ordinary activities in exchange for consideration."). To achieve that objective, an entity shall disclose qualitative and quantitative information about all of the following:** 1. a **Its contracts with customers (see paragraphs [606-10-50-4 through 50-16](https://asc.understandingaccounting.org/asc/606/10/#606-10-50-4) )** 2. b **The significant judgments, and changes in the judgments, made in applying the guidance in this Topic to those contracts (see paragraphs [606-10-50-17 through 50-21](https://asc.understandingaccounting.org/asc/606/10/#606-10-50-17) )** 3. c **Any assets recognized from the costs to obtain or fulfill a contract with a customer in accordance with paragraph [340-40-25-1](https://asc.understandingaccounting.org/asc/340/40/#340-40-25-1) or [340-40-25-5](https://asc.understandingaccounting.org/asc/340/40/#340-40-25-5) (see paragraphs [340-40-50-1 through 50-6](https://asc.understandingaccounting.org/asc/340/40/#340-40-50-1) ).** ##### [606-10-50-2](https://asc.understandingaccounting.org/asc/606/10/#606-10-50-2) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:11.428Z to 2026-09-09T23:18:11.428Z Record version: sha256:b6440c7860ceac34665a0cb201f3dcc19a6a623459cfb8e76f5ce99526dd99b6 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An entity shall consider the level of detail necessary to satisfy the disclosure objective and how much emphasis to place on each of the various requirements. An entity shall aggregate or disaggregate disclosures so that useful information is not obscured by either the inclusion of a large amount of insignificant detail or the aggregation of items that have substantially different characteristics. ##### [606-10-50-3](https://asc.understandingaccounting.org/asc/606/10/#606-10-50-3) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:11.428Z to 2026-09-09T23:18:11.428Z Record version: sha256:29c70df509551380a22b9e7ee73e342da2d8f17d404d576343747d444728df6a Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Amounts disclosed are for each reporting period for which a statement of comprehensive income (statement of activities) is presented and as of each reporting period for which a statement of financial position is presented. An entity need not disclose information in accordance with the guidance in this Topic if it has provided the information in accordance with another Topic. #### Contracts with Customers ##### [606-10-50-4](https://asc.understandingaccounting.org/asc/606/10/#606-10-50-4) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:11.428Z to 2026-09-09T23:18:11.428Z Record version: sha256:389fef8807d2720d54724065ee637d9906622977e5452f1fc6b3b95b54a8d8b6 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An entity shall disclose all of the following amounts for the reporting period unless those amounts are presented separately in the statement of comprehensive income (statement of activities) in accordance with other Topics: 1. a [Revenue](https://asc.understandingaccounting.org/glossary/r/#revenue "Inflows or other enhancements of assets of an entity or settlements of its liabilities (or a combination of both) from delivering or producing goods, rendering services, or other activities that constitute the entity's ongoing major or central operations.") recognized from [contracts](https://asc.understandingaccounting.org/glossary/c/#contract "An agreement between two or more parties that creates enforceable rights and obligations.") with [customers](https://asc.understandingaccounting.org/glossary/c/#customer "A party that has contracted with an entity to obtain goods or services that are an output of the entity's ordinary activities in exchange for consideration."), which the entity shall disclose separately from its other sources of revenue 2. b Credit losses recorded (in accordance with Subtopic 326-20 on financial instruments measured at amortized cost) on any receivables or [contract assets](https://asc.understandingaccounting.org/glossary/c/#contract-asset "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).") arising from an entity's contracts with customers, which the entity shall disclose separately from credit losses from other contracts. ##### [606-10-50-5](https://asc.understandingaccounting.org/asc/606/10/#606-10-50-5) Pending content: yes Source downloaded (UTC): 2026-09-09T23:18:11.428Z to 2026-09-09T23:18:11.428Z Record version: sha256:16ebecfd2d0fbe68e9fe947b9a5dc77e544d87580b5a6ed8d3a4aa2ad8c122e2 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An entity shall disaggregate [revenue](https://asc.understandingaccounting.org/glossary/r/#revenue "Inflows or other enhancements of assets of an entity or settlements of its liabilities (or a combination of both) from delivering or producing goods, rendering services, or other activities that constitute the entity's ongoing major or central operations.") recognized from [contracts](https://asc.understandingaccounting.org/glossary/c/#contract "An agreement between two or more parties that creates enforceable rights and obligations.") with [customers](https://asc.understandingaccounting.org/glossary/c/#customer "A party that has contracted with an entity to obtain goods or services that are an output of the entity's ordinary activities in exchange for consideration.") into categories that depict how the nature, amount, timing, and uncertainty of revenue and cash flows are affected by economic factors. An entity shall apply the guidance in paragraphs [606-10-55-89 through 55-91](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-89) when selecting the categories to use to disaggregate revenue. Transition date:(P) December 16, 2027; (N) December 16, 2028Transition guidance: [270-10-65-1](https://asc.understandingaccounting.org/asc/270/10/#270-10-65-1)For interim and annual reporting periods, an entity shall disaggregate [revenue](https://asc.understandingaccounting.org/glossary/r/#revenue "Inflows or other enhancements of assets of an entity or settlements of its liabilities (or a combination of both) from delivering or producing goods, rendering services, or other activities that constitute the entity's ongoing major or central operations.") recognized from [contracts](https://asc.understandingaccounting.org/glossary/c/#contract "An agreement between two or more parties that creates enforceable rights and obligations.") with [customers](https://asc.understandingaccounting.org/glossary/c/#customer "A party that has contracted with an entity to obtain goods or services that are an output of the entity's ordinary activities in exchange for consideration.") into categories that depict how the nature, amount, timing, and uncertainty of revenue and cash flows are affected by economic factors. An entity shall apply the guidance in paragraphs [606-10-55-89 through 55-91](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-89) when selecting the categories to use to disaggregate revenue. ##### [606-10-50-6](https://asc.understandingaccounting.org/asc/606/10/#606-10-50-6) Pending content: yes Source downloaded (UTC): 2026-09-09T23:18:11.428Z to 2026-09-09T23:18:11.428Z Record version: sha256:cc438f4a0c4b33594337589a2cc080d4040d89e72cb39e6c44bcaa43eb511123 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. In addition, an entity shall disclose sufficient information to enable users of financial statements to understand the relationship between the disclosure of disaggregated revenue (in accordance with paragraph [606-10-50-5](https://asc.understandingaccounting.org/asc/606/10/#606-10-50-5)) and revenue information that is disclosed for each reportable segment, if the entity applies Topic 280 on segment reporting. Transition date:(P) December 16, 2027; (N) December 16, 2028Transition guidance: [270-10-65-1](https://asc.understandingaccounting.org/asc/270/10/#270-10-65-1)In addition, in interim and annual reporting periods, an entity shall disclose sufficient information to enable users of financial statements to understand the relationship between the disclosure of disaggregated revenue (in accordance with paragraph [606-10-50-5](https://asc.understandingaccounting.org/asc/606/10/#606-10-50-5)) and revenue information that is disclosed for each reportable segment, if the entity applies Topic 280 on segment reporting. ##### [606-10-50-7](https://asc.understandingaccounting.org/asc/606/10/#606-10-50-7) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:11.428Z to 2026-09-09T23:18:11.428Z Record version: sha256:fb975e7f7c66a84cb36cbf3efb571c4826fc53e818f52fc8699fe84b11d1bdf4 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An entity, except for a [public business entity](https://asc.understandingaccounting.org/glossary/p/#public-business-entity "A public business entity is a business entity meeting any one of the criteria below. Neither a not-for-profit entity nor an employee benefit plan is a business entity. It is required by the U.S. Securities and Exchange Commission (SEC) to file or furnish financial statements, or does file or furnish financial statements (including voluntary filers), with the SEC (including other entities whose financial statements or financial information are required to be or are included in a filing). It is required by the Securities Exchange Act of 1934 (the Act), as amended, or rules or regulations promulgated under the Act, to file or furnish financial statements with a regulatory agency other than the SEC. It is required to file or furnish financial statements with a foreign or domestic regulatory agency in preparation for the sale of or for purposes of issuing securities that are not subject to contractual restrictions on transfer. It has issued, or is a conduit bond obligor for, securities that are traded, listed, or quoted on an exchange or an over-the-counter market. It has one or more securities that are not subject to contractual restrictions on transfer, and it is required by law, contract, or regulation to prepare U.S. GAAP financial statements (including notes) and make them publicly available on a periodic basis (for example, interim or annual periods). An entity must meet both of these conditions to meet this criterion. An entity may meet the definition of a public business entity solely because its financial statements or financial information is included in another entity's filing with the SEC. In that case, the entity is only a public business entity for purposes of financial statements that are filed or furnished with the SEC."), a [not-for-profit entity](https://asc.understandingaccounting.org/glossary/n/#not-for-profit-entity "An entity that possesses the following characteristics, in varying degrees, that distinguish it from a business entity: Contributions of significant amounts of resources from resource providers who do not expect commensurate or proportionate pecuniary return Operating purposes other than to provide goods or services at a profit Absence of ownership interests like those of business entities. Entities that clearly fall outside this definition include the following: All investor-owned entities Entities that provide dividends, lower costs, or other economic benefits directly and proportionately to their owners, members, or participants, such as mutual insurance entities, credit unions, farm and rural electric cooperatives, and employee benefit plans.") that has issued, or is a conduit bond obligor for, securities that are traded, listed, or quoted on an exchange or an over-the-counter market, or an employee benefit plan that files or furnishes financial statements with or to the Securities and Exchange Commission (SEC), may elect not to apply the quantitative disaggregation disclosure guidance in paragraphs [606-10-50-5 through 50-6](https://asc.understandingaccounting.org/asc/606/10/#606-10-50-5) and [606-10-55-89 through 55-91](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-89) . If an entity elects not to provide those disclosures, the entity shall disclose, at a minimum, revenue disaggregated according to the timing of transfer of goods or services (for example, revenue from goods or services transferred to customers at a point in time and revenue from goods or services transferred to customers over time) and qualitative information about how economic factors (such as type of customer, geographical location of customers, and type of contract) affect the nature, amount, timing, and uncertainty of revenue and cash flows. ##### [606-10-50-8](https://asc.understandingaccounting.org/asc/606/10/#606-10-50-8) Pending content: yes Source downloaded (UTC): 2026-09-09T23:18:11.428Z to 2026-09-09T23:18:11.428Z Record version: sha256:e54078a3f72a31ecd7a525373c1d6be0b8a0bb8747b842f0c5d2c46640610499 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An entity shall disclose all of the following: 1. a The opening and closing balances of receivables, [contract assets](https://asc.understandingaccounting.org/glossary/c/#contract-asset "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)."), and [contract liabilities](https://asc.understandingaccounting.org/glossary/c/#contract-liability "An entity's obligation to transfer goods or services to a customer for which the entity has received consideration (or the amount is due) from the customer.") from [contracts](https://asc.understandingaccounting.org/glossary/c/#contract "An agreement between two or more parties that creates enforceable rights and obligations.") with [customers](https://asc.understandingaccounting.org/glossary/c/#customer "A party that has contracted with an entity to obtain goods or services that are an output of the entity's ordinary activities in exchange for consideration."), if not otherwise separately presented or disclosed 2. b [Revenue](https://asc.understandingaccounting.org/glossary/r/#revenue "Inflows or other enhancements of assets of an entity or settlements of its liabilities (or a combination of both) from delivering or producing goods, rendering services, or other activities that constitute the entity's ongoing major or central operations.") recognized in the reporting period that was included in the contract liability balance at the beginning of the period 3. c [Subparagraph superseded by Accounting Standards Update No. 2016-20](https://asc.understandingaccounting.org/updates/asu-2016-20/). Transition date:(P) December 16, 2027; (N) December 16, 2028Transition guidance: [270-10-65-1](https://asc.understandingaccounting.org/asc/270/10/#270-10-65-1)For interim and annual reporting periods, an entity shall disclose all of the following: 1. a The opening and closing balances of receivables, [contract assets](https://asc.understandingaccounting.org/glossary/c/#contract-asset "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)."), and [contract liabilities](https://asc.understandingaccounting.org/glossary/c/#contract-liability "An entity's obligation to transfer goods or services to a customer for which the entity has received consideration (or the amount is due) from the customer.") from [contracts](https://asc.understandingaccounting.org/glossary/c/#contract "An agreement between two or more parties that creates enforceable rights and obligations.") with [customers](https://asc.understandingaccounting.org/glossary/c/#customer "A party that has contracted with an entity to obtain goods or services that are an output of the entity's ordinary activities in exchange for consideration."), if not otherwise separately presented or disclosed 2. b [Revenue](https://asc.understandingaccounting.org/glossary/r/#revenue "Inflows or other enhancements of assets of an entity or settlements of its liabilities (or a combination of both) from delivering or producing goods, rendering services, or other activities that constitute the entity's ongoing major or central operations.") recognized in the reporting period that was included in the contract liability balance at the beginning of the period 3. c [Subparagraph superseded by Accounting Standards Update No. 2016-20](https://asc.understandingaccounting.org/updates/asu-2016-20/). ##### [606-10-50-9](https://asc.understandingaccounting.org/asc/606/10/#606-10-50-9) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:11.428Z to 2026-09-09T23:18:11.428Z Record version: sha256:7d55372f282dcee256817176f85dd2d814fac930e4ca03b8489d04e49222c10a Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An entity shall explain how the timing of satisfaction of its performance obligations (see paragraph [606-10-50-12(a)](https://asc.understandingaccounting.org/asc/606/10/#606-10-50-12)) relates to the typical timing of payment (see paragraph [606-10-50-12(b)](https://asc.understandingaccounting.org/asc/606/10/#606-10-50-12)) and the effect that those factors have on the contract asset and the contract liability balances. The explanation provided may use qualitative information. ##### [606-10-50-10](https://asc.understandingaccounting.org/asc/606/10/#606-10-50-10) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:11.428Z to 2026-09-09T23:18:11.428Z Record version: sha256:39a7af8da6f842f2d9cb64ac786becc3800654bfc099a651bc6d1c24a36ffc76 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An entity shall provide an explanation of the significant changes in the contract asset and the contract liability balances during the reporting period. The explanation shall include qualitative and quantitative information. Examples of changes in the entity's balances of contract assets and contract liabilities include any of the following: 1. a Changes due to business combinations 2. b Cumulative catch-up adjustments to revenue that affect the corresponding contract asset or contract liability, including adjustments arising from a change in the measure of progress, a change in an estimate of the transaction price (including any changes in the assessment of whether an estimate of variable consideration is constrained), or a contract modification 3. c Impairment of a contract asset 4. d A change in the time frame for a right to consideration to become unconditional (that is, for a contract asset to be reclassified to a receivable) 5. e A change in the time frame for a performance obligation to be satisfied (that is, for the recognition of revenue arising from a contract liability). ##### [606-10-50-11](https://asc.understandingaccounting.org/asc/606/10/#606-10-50-11) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:11.428Z to 2026-09-09T23:18:11.428Z Record version: sha256:f3a28835277b6147d533777389319df9fca9d35f4eaf12124ca6ac1817b11c4f Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An entity, except for a [public business entity](https://asc.understandingaccounting.org/glossary/p/#public-business-entity "A public business entity is a business entity meeting any one of the criteria below. Neither a not-for-profit entity nor an employee benefit plan is a business entity. It is required by the U.S. Securities and Exchange Commission (SEC) to file or furnish financial statements, or does file or furnish financial statements (including voluntary filers), with the SEC (including other entities whose financial statements or financial information are required to be or are included in a filing). It is required by the Securities Exchange Act of 1934 (the Act), as amended, or rules or regulations promulgated under the Act, to file or furnish financial statements with a regulatory agency other than the SEC. It is required to file or furnish financial statements with a foreign or domestic regulatory agency in preparation for the sale of or for purposes of issuing securities that are not subject to contractual restrictions on transfer. It has issued, or is a conduit bond obligor for, securities that are traded, listed, or quoted on an exchange or an over-the-counter market. It has one or more securities that are not subject to contractual restrictions on transfer, and it is required by law, contract, or regulation to prepare U.S. GAAP financial statements (including notes) and make them publicly available on a periodic basis (for example, interim or annual periods). An entity must meet both of these conditions to meet this criterion. An entity may meet the definition of a public business entity solely because its financial statements or financial information is included in another entity's filing with the SEC. In that case, the entity is only a public business entity for purposes of financial statements that are filed or furnished with the SEC."), a [not-for-profit entity](https://asc.understandingaccounting.org/glossary/n/#not-for-profit-entity "An entity that possesses the following characteristics, in varying degrees, that distinguish it from a business entity: Contributions of significant amounts of resources from resource providers who do not expect commensurate or proportionate pecuniary return Operating purposes other than to provide goods or services at a profit Absence of ownership interests like those of business entities. Entities that clearly fall outside this definition include the following: All investor-owned entities Entities that provide dividends, lower costs, or other economic benefits directly and proportionately to their owners, members, or participants, such as mutual insurance entities, credit unions, farm and rural electric cooperatives, and employee benefit plans.") that has issued, or is a conduit bond obligor for, securities that are traded, listed, or quoted on an exchange or an over-the-counter market, or an employee benefit plan that files or furnishes financial statements with or to the SEC, may elect not to provide any or all of the disclosures in paragraphs [606-10-50-8 through 50-10](https://asc.understandingaccounting.org/asc/606/10/#606-10-50-8) and [606-10-50-12A](https://asc.understandingaccounting.org/asc/606/10/#606-10-50-12A). However, if an entity elects not to provide the disclosures in paragraphs [606-10-50-8 through 50-10](https://asc.understandingaccounting.org/asc/606/10/#606-10-50-8) and [606-10-50-12A](https://asc.understandingaccounting.org/asc/606/10/#606-10-50-12A), the entity shall provide the disclosure in paragraph [606-10-50-8(a)](https://asc.understandingaccounting.org/asc/606/10/#606-10-50-8), which requires the disclosure of the opening and closing balances of receivables, contract assets, and contract liabilities from contracts with customers, if not otherwise separately presented or disclosed. ##### [606-10-50-12](https://asc.understandingaccounting.org/asc/606/10/#606-10-50-12) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:11.428Z to 2026-09-09T23:18:11.428Z Record version: sha256:21ad93a898a715abccd2a3789e78b81db0b1030af4c481c0423e80cb58a07e83 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An entity shall disclose information about its [performance obligations](https://asc.understandingaccounting.org/glossary/p/#performance-obligation "A promise in a contract with a customer to transfer to the customer either: A good or service (or a bundle of goods or services) that is distinct A series of distinct goods or services that are substantially the same and that have the same pattern of transfer to the customer.") in [contracts](https://asc.understandingaccounting.org/glossary/c/#contract "An agreement between two or more parties that creates enforceable rights and obligations.") with [customers](https://asc.understandingaccounting.org/glossary/c/#customer "A party that has contracted with an entity to obtain goods or services that are an output of the entity's ordinary activities in exchange for consideration."), including a description of all of the following: 1. a When the entity typically satisfies its performance obligations (for example, upon shipment, upon delivery, as services are rendered, or upon completion of service) including when performance obligations are satisfied in a bill-and-hold arrangement 2. b The significant payment terms (for example, when payment typically is due, whether the contract has a significant financing component, whether the consideration amount is variable, and whether the estimate of variable consideration is typically constrained in accordance with paragraphs [606-10-32-11 through 32-13](https://asc.understandingaccounting.org/asc/606/10/#606-10-32-11) ) 3. c The nature of the goods or services that the entity has promised to transfer, highlighting any performance obligations to arrange for another party to transfer goods or services (that is, if the entity is acting as an agent) 4. d Obligations for returns, refunds, and other similar obligations 5. e Types of warranties and related obligations. ##### [606-10-50-12A](https://asc.understandingaccounting.org/asc/606/10/#606-10-50-12A) Pending content: yes Source downloaded (UTC): 2026-09-09T23:18:11.428Z to 2026-09-09T23:18:11.428Z Record version: sha256:503fbaad65681ce9c4e99a85d938369c893002e022a4a625eb67480201a72276 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An entity shall disclose [revenue](https://asc.understandingaccounting.org/glossary/r/#revenue "Inflows or other enhancements of assets of an entity or settlements of its liabilities (or a combination of both) from delivering or producing goods, rendering services, or other activities that constitute the entity's ongoing major or central operations.") recognized in the reporting period from performance obligations satisfied (or partially satisfied) in previous periods (for example, changes in transaction price). Transition date:(P) December 16, 2027; (N) December 16, 2028Transition guidance: [270-10-65-1](https://asc.understandingaccounting.org/asc/270/10/#270-10-65-1)For interim and annual reporting periods, an entity shall disclose [revenue](https://asc.understandingaccounting.org/glossary/r/#revenue "Inflows or other enhancements of assets of an entity or settlements of its liabilities (or a combination of both) from delivering or producing goods, rendering services, or other activities that constitute the entity's ongoing major or central operations.") recognized in the reporting period from performance obligations satisfied (or partially satisfied) in previous periods (for example, changes in transaction price). ##### [606-10-50-13](https://asc.understandingaccounting.org/asc/606/10/#606-10-50-13) Pending content: yes Source downloaded (UTC): 2026-09-09T23:18:11.428Z to 2026-09-09T23:18:11.428Z Record version: sha256:038924fe6df99b0e321fd58ddf5219709f445239379c2eaa8ec47e515e17ec59 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An entity shall disclose the following information about its remaining [performance obligations](https://asc.understandingaccounting.org/glossary/p/#performance-obligation "A promise in a contract with a customer to transfer to the customer either: A good or service (or a bundle of goods or services) that is distinct A series of distinct goods or services that are substantially the same and that have the same pattern of transfer to the customer."): 1. a The aggregate amount of the [transaction price](https://asc.understandingaccounting.org/glossary/t/#transaction-price "The amount of consideration to which an entity expects to be entitled in exchange for transferring promised goods or services to a customer, excluding amounts collected on behalf of third parties.") allocated to the performance obligations that are unsatisfied (or partially unsatisfied) as of the end of the reporting period 2. b An explanation of when the entity expects to recognize as [revenue](https://asc.understandingaccounting.org/glossary/r/#revenue "Inflows or other enhancements of assets of an entity or settlements of its liabilities (or a combination of both) from delivering or producing goods, rendering services, or other activities that constitute the entity's ongoing major or central operations.") the amount disclosed in accordance with paragraph [606-10-50-13(a)](https://asc.understandingaccounting.org/asc/606/10/#606-10-50-13), which the entity shall disclose in either of the following ways: 1. 1 On a quantitative basis using the time bands that would be most appropriate for the duration of the remaining performance obligations 2. 2 By using qualitative information. Transition date:(P) December 16, 2027; (N) December 16, 2028Transition guidance: [270-10-65-1](https://asc.understandingaccounting.org/asc/270/10/#270-10-65-1)For interim and annual reporting periods, an entity shall disclose the following information about its remaining [performance obligations](https://asc.understandingaccounting.org/glossary/p/#performance-obligation "A promise in a contract with a customer to transfer to the customer either: A good or service (or a bundle of goods or services) that is distinct A series of distinct goods or services that are substantially the same and that have the same pattern of transfer to the customer."): 1. a The aggregate amount of the [transaction price](https://asc.understandingaccounting.org/glossary/t/#transaction-price "The amount of consideration to which an entity expects to be entitled in exchange for transferring promised goods or services to a customer, excluding amounts collected on behalf of third parties.") allocated to the performance obligations that are unsatisfied (or partially unsatisfied) as of the end of the reporting period 2. b An explanation of when the entity expects to recognize as [revenue](https://asc.understandingaccounting.org/glossary/r/#revenue "Inflows or other enhancements of assets of an entity or settlements of its liabilities (or a combination of both) from delivering or producing goods, rendering services, or other activities that constitute the entity's ongoing major or central operations.") the amount disclosed in accordance with paragraph [606-10-50-13(a)](https://asc.understandingaccounting.org/asc/606/10/#606-10-50-13), which the entity shall disclose in either of the following ways: 1. 1 On a quantitative basis using the time bands that would be most appropriate for the duration of the remaining performance obligations 2. 2 By using qualitative information. ##### [606-10-50-14](https://asc.understandingaccounting.org/asc/606/10/#606-10-50-14) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:11.428Z to 2026-09-09T23:18:11.428Z Record version: sha256:880727a32e3ce39e2f95fc1f42444a294bfe73373f0c4c80584d96a8f1ccc8b2 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An entity need not disclose the information in paragraph [606-10-50-13](https://asc.understandingaccounting.org/asc/606/10/#606-10-50-13) for a performance obligation if either of the following conditions is met: 1. a The performance obligation is part of a [contract](https://asc.understandingaccounting.org/glossary/c/#contract "An agreement between two or more parties that creates enforceable rights and obligations.") that has an original expected duration of one year or less. 2. b The entity recognizes revenue from the satisfaction of the performance obligation in accordance with paragraph [606-10-55-18](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-18). ##### [606-10-50-14A](https://asc.understandingaccounting.org/asc/606/10/#606-10-50-14A) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:11.428Z to 2026-09-09T23:18:11.428Z Record version: sha256:256cf3c3b3fce5db8d73a004a108b1cbdcc98cacbf76c2e2a074e390d850d8c2 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An entity need not disclose the information in paragraph [606-10-50-13](https://asc.understandingaccounting.org/asc/606/10/#606-10-50-13) for variable consideration for which either of the following conditions is met: 1. a The variable consideration is a sales-based or usage-based royalty promised in exchange for a license of intellectual property accounted for in accordance with paragraphs [606-10-55-65 through 55-65B](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-65). 2. b The variable consideration is allocated entirely to a wholly unsatisfied performance obligation or to a wholly unsatisfied promise to transfer a distinct good or service that forms part of a single performance obligation in accordance with paragraph [606-10-25-14(b)](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-14), for which the criteria in paragraph [606-10-32-40](https://asc.understandingaccounting.org/asc/606/10/#606-10-32-40) have been met. ##### [606-10-50-14B](https://asc.understandingaccounting.org/asc/606/10/#606-10-50-14B) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:11.428Z to 2026-09-09T23:18:11.428Z Record version: sha256:58b15f35ff949110dfc8d8ff0102e8bfe1d46f9ef9e5331cf736cf726fb7523c Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The optional exemptions in paragraphs [606-10-50-14(b)](https://asc.understandingaccounting.org/asc/606/10/#606-10-50-14) and [606-10-50-14A](https://asc.understandingaccounting.org/asc/606/10/#606-10-50-14A) shall not be applied to fixed consideration. ##### [606-10-50-15](https://asc.understandingaccounting.org/asc/606/10/#606-10-50-15) Pending content: yes Source downloaded (UTC): 2026-09-09T23:18:11.428Z to 2026-09-09T23:18:11.428Z Record version: sha256:e37e7d1d28b10306197140c5dd29d97493a5c37edb624b31af47a04f732ec623 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An entity shall disclose which optional exemptions in paragraphs [606-10-50-14 through 50-14A](https://asc.understandingaccounting.org/asc/606/10/#606-10-50-14) it is applying. In addition, an entity applying the optional exemptions in paragraphs [606-10-50-14 through 50-14A](https://asc.understandingaccounting.org/asc/606/10/#606-10-50-14) shall disclose the nature of the performance obligations, the remaining duration (see paragraph [606-10-25-3](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-3)), and a description of the variable consideration (for example, the nature of the variability and how that variability will be resolved) that has been excluded from the information disclosed in accordance with paragraph [606-10-50-13](https://asc.understandingaccounting.org/asc/606/10/#606-10-50-13). This information shall include sufficient detail to enable users of financial statements to understand the remaining performance obligations that the entity excluded from the information disclosed in accordance with paragraph [606-10-50-13](https://asc.understandingaccounting.org/asc/606/10/#606-10-50-13). In addition, an entity shall explain whether any consideration from contracts with [customers](https://asc.understandingaccounting.org/glossary/c/#customer "A party that has contracted with an entity to obtain goods or services that are an output of the entity's ordinary activities in exchange for consideration.") is not included in the transaction price and, therefore, not included in the information disclosed in accordance with paragraph [606-10-50-13](https://asc.understandingaccounting.org/asc/606/10/#606-10-50-13). For example, an estimate of the transaction price would not include any estimated amounts of variable consideration that are constrained (see paragraphs [606-10-32-11 through 32-13](https://asc.understandingaccounting.org/asc/606/10/#606-10-32-11) ). Transition date:(P) December 16, 2027; (N) December 16, 2028Transition guidance: [270-10-65-1](https://asc.understandingaccounting.org/asc/270/10/#270-10-65-1)For interim and annual reporting periods, an entity shall disclose which optional exemptions in paragraphs [606-10-50-14 through 50-14A](https://asc.understandingaccounting.org/asc/606/10/#606-10-50-14) it is applying. In addition, an entity applying the optional exemptions in paragraphs [606-10-50-14 through 50-14A](https://asc.understandingaccounting.org/asc/606/10/#606-10-50-14) shall disclose in interim and annual reporting periods the nature of the performance obligations, the remaining duration (see paragraph [606-10-25-3](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-3)), and a description of the variable consideration (for example, the nature of the variability and how that variability will be resolved) that has been excluded from the information disclosed in accordance with paragraph [606-10-50-13](https://asc.understandingaccounting.org/asc/606/10/#606-10-50-13). This information shall include sufficient detail to enable users of financial statements to understand the remaining performance obligations that the entity excluded from the information disclosed in accordance with paragraph [606-10-50-13](https://asc.understandingaccounting.org/asc/606/10/#606-10-50-13). In addition, an entity shall explain whether any consideration from contracts with [customers](https://asc.understandingaccounting.org/glossary/c/#customer "A party that has contracted with an entity to obtain goods or services that are an output of the entity's ordinary activities in exchange for consideration.") is not included in the transaction price and, therefore, not included in the information disclosed in accordance with paragraph [606-10-50-13](https://asc.understandingaccounting.org/asc/606/10/#606-10-50-13). For example, an estimate of the transaction price would not include any estimated amounts of variable consideration that are constrained (see paragraphs [606-10-32-11 through 32-13](https://asc.understandingaccounting.org/asc/606/10/#606-10-32-11) ). ##### [606-10-50-16](https://asc.understandingaccounting.org/asc/606/10/#606-10-50-16) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:11.428Z to 2026-09-09T23:18:11.428Z Record version: sha256:5db2d3b445105f8830e09b709812bc3acbf80a5079ec1472cc7907122c7737ba Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An entity, except for a [public business entity](https://asc.understandingaccounting.org/glossary/p/#public-business-entity "A public business entity is a business entity meeting any one of the criteria below. Neither a not-for-profit entity nor an employee benefit plan is a business entity. It is required by the U.S. Securities and Exchange Commission (SEC) to file or furnish financial statements, or does file or furnish financial statements (including voluntary filers), with the SEC (including other entities whose financial statements or financial information are required to be or are included in a filing). It is required by the Securities Exchange Act of 1934 (the Act), as amended, or rules or regulations promulgated under the Act, to file or furnish financial statements with a regulatory agency other than the SEC. It is required to file or furnish financial statements with a foreign or domestic regulatory agency in preparation for the sale of or for purposes of issuing securities that are not subject to contractual restrictions on transfer. It has issued, or is a conduit bond obligor for, securities that are traded, listed, or quoted on an exchange or an over-the-counter market. It has one or more securities that are not subject to contractual restrictions on transfer, and it is required by law, contract, or regulation to prepare U.S. GAAP financial statements (including notes) and make them publicly available on a periodic basis (for example, interim or annual periods). An entity must meet both of these conditions to meet this criterion. An entity may meet the definition of a public business entity solely because its financial statements or financial information is included in another entity's filing with the SEC. In that case, the entity is only a public business entity for purposes of financial statements that are filed or furnished with the SEC."), a [not-for-profit entity](https://asc.understandingaccounting.org/glossary/n/#not-for-profit-entity "An entity that possesses the following characteristics, in varying degrees, that distinguish it from a business entity: Contributions of significant amounts of resources from resource providers who do not expect commensurate or proportionate pecuniary return Operating purposes other than to provide goods or services at a profit Absence of ownership interests like those of business entities. Entities that clearly fall outside this definition include the following: All investor-owned entities Entities that provide dividends, lower costs, or other economic benefits directly and proportionately to their owners, members, or participants, such as mutual insurance entities, credit unions, farm and rural electric cooperatives, and employee benefit plans.") that has issued, or is a conduit bond obligor for, securities that are traded, listed, or quoted on an exchange or an over-the-counter market, or an employee benefit plan that files or furnishes financial statements with or to the SEC, may elect not to provide the disclosures in paragraphs [606-10-50-13 through 50-15](https://asc.understandingaccounting.org/asc/606/10/#606-10-50-13) . #### Significant Judgments in the Application of the Guidance in This Topic ##### [606-10-50-17](https://asc.understandingaccounting.org/asc/606/10/#606-10-50-17) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:11.428Z to 2026-09-09T23:18:11.428Z Record version: sha256:4ebd4eb032cd22dcfe3696d99a749c580ebd72666568b4a3e038477fe14566e1 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An entity shall disclose the judgments, and changes in the judgments, made in applying the guidance in this Topic that significantly affect the determination of the amount and timing of [revenue](https://asc.understandingaccounting.org/glossary/r/#revenue "Inflows or other enhancements of assets of an entity or settlements of its liabilities (or a combination of both) from delivering or producing goods, rendering services, or other activities that constitute the entity's ongoing major or central operations.") from [contracts](https://asc.understandingaccounting.org/glossary/c/#contract "An agreement between two or more parties that creates enforceable rights and obligations.") with [customers](https://asc.understandingaccounting.org/glossary/c/#customer "A party that has contracted with an entity to obtain goods or services that are an output of the entity's ordinary activities in exchange for consideration."). In particular, an entity shall explain the judgments, and changes in the judgments, used in determining both of the following: 1. a The timing of satisfaction of [performance obligations](https://asc.understandingaccounting.org/glossary/p/#performance-obligation "A promise in a contract with a customer to transfer to the customer either: A good or service (or a bundle of goods or services) that is distinct A series of distinct goods or services that are substantially the same and that have the same pattern of transfer to the customer.") (see paragraphs [606-10-50-18 through 50-19](https://asc.understandingaccounting.org/asc/606/10/#606-10-50-18) ) 2. b The [transaction price](https://asc.understandingaccounting.org/glossary/t/#transaction-price "The amount of consideration to which an entity expects to be entitled in exchange for transferring promised goods or services to a customer, excluding amounts collected on behalf of third parties.") and the amounts allocated to performance obligations (see paragraph [606-10-50-20](https://asc.understandingaccounting.org/asc/606/10/#606-10-50-20)). ##### [606-10-50-18](https://asc.understandingaccounting.org/asc/606/10/#606-10-50-18) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:11.428Z to 2026-09-09T23:18:11.428Z Record version: sha256:a6bd6d420b70e06d528483a7ff27794823b68e56afd52216415bf7fb5d4f4562 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. For [performance obligations](https://asc.understandingaccounting.org/glossary/p/#performance-obligation "A promise in a contract with a customer to transfer to the customer either: A good or service (or a bundle of goods or services) that is distinct A series of distinct goods or services that are substantially the same and that have the same pattern of transfer to the customer.") that an entity satisfies over time, an entity shall disclose both of the following: 1. a The methods used to recognize [revenue](https://asc.understandingaccounting.org/glossary/r/#revenue "Inflows or other enhancements of assets of an entity or settlements of its liabilities (or a combination of both) from delivering or producing goods, rendering services, or other activities that constitute the entity's ongoing major or central operations.") (for example, a description of the output methods or input methods used and how those methods are applied) 2. b An explanation of why the methods used provide a faithful depiction of the transfer of goods or services. ##### [606-10-50-19](https://asc.understandingaccounting.org/asc/606/10/#606-10-50-19) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:11.428Z to 2026-09-09T23:18:11.428Z Record version: sha256:c31f3dcf0e22e9bcf40f618035d6fe5c94e41b72cfbbf138f5458a1b5d4defa8 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. For performance obligations satisfied at a point in time, an entity shall disclose the significant judgments made in evaluating when a [customer](https://asc.understandingaccounting.org/glossary/c/#customer "A party that has contracted with an entity to obtain goods or services that are an output of the entity's ordinary activities in exchange for consideration.") obtains control of promised goods or services. ##### [606-10-50-20](https://asc.understandingaccounting.org/asc/606/10/#606-10-50-20) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:11.428Z to 2026-09-09T23:18:11.428Z Record version: sha256:db675491e605528cf17c65750f5f39da5e4fff6a61ab74401e5122ebbffeb0b2 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An entity shall disclose information about the methods, inputs, and assumptions used for all of the following: 1. a Determining the [transaction price](https://asc.understandingaccounting.org/glossary/t/#transaction-price "The amount of consideration to which an entity expects to be entitled in exchange for transferring promised goods or services to a customer, excluding amounts collected on behalf of third parties."), which includes, but is not limited to, estimating variable consideration, adjusting the consideration for the effects of the time value of money, and measuring noncash consideration 2. b Assessing whether an estimate of variable consideration is constrained 3. c Allocating the transaction price, including estimating [standalone selling prices](https://asc.understandingaccounting.org/glossary/s/#standalone-selling-price "The price at which an entity would sell a promised good or service separately to a customer.") of promised goods or services and allocating discounts and variable consideration to a specific part of the [contract](https://asc.understandingaccounting.org/glossary/c/#contract "An agreement between two or more parties that creates enforceable rights and obligations.") (if applicable) 4. d Measuring obligations for returns, refunds, and other similar obligations. ##### [606-10-50-21](https://asc.understandingaccounting.org/asc/606/10/#606-10-50-21) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:11.428Z to 2026-09-09T23:18:11.428Z Record version: sha256:8f6b0d2a6332e1fe9284ae361fb8ba0c50240fc5354bbcfaecbc4ef3e71db824 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An entity except for a [public business entity](https://asc.understandingaccounting.org/glossary/p/#public-business-entity "A public business entity is a business entity meeting any one of the criteria below. Neither a not-for-profit entity nor an employee benefit plan is a business entity. It is required by the U.S. Securities and Exchange Commission (SEC) to file or furnish financial statements, or does file or furnish financial statements (including voluntary filers), with the SEC (including other entities whose financial statements or financial information are required to be or are included in a filing). It is required by the Securities Exchange Act of 1934 (the Act), as amended, or rules or regulations promulgated under the Act, to file or furnish financial statements with a regulatory agency other than the SEC. It is required to file or furnish financial statements with a foreign or domestic regulatory agency in preparation for the sale of or for purposes of issuing securities that are not subject to contractual restrictions on transfer. It has issued, or is a conduit bond obligor for, securities that are traded, listed, or quoted on an exchange or an over-the-counter market. It has one or more securities that are not subject to contractual restrictions on transfer, and it is required by law, contract, or regulation to prepare U.S. GAAP financial statements (including notes) and make them publicly available on a periodic basis (for example, interim or annual periods). An entity must meet both of these conditions to meet this criterion. An entity may meet the definition of a public business entity solely because its financial statements or financial information is included in another entity's filing with the SEC. In that case, the entity is only a public business entity for purposes of financial statements that are filed or furnished with the SEC."), a [not-for-profit entity](https://asc.understandingaccounting.org/glossary/n/#not-for-profit-entity "An entity that possesses the following characteristics, in varying degrees, that distinguish it from a business entity: Contributions of significant amounts of resources from resource providers who do not expect commensurate or proportionate pecuniary return Operating purposes other than to provide goods or services at a profit Absence of ownership interests like those of business entities. Entities that clearly fall outside this definition include the following: All investor-owned entities Entities that provide dividends, lower costs, or other economic benefits directly and proportionately to their owners, members, or participants, such as mutual insurance entities, credit unions, farm and rural electric cooperatives, and employee benefit plans.") that has issued, or is a conduit bond obligor for, securities that are traded, listed, or quoted on an exchange or an over-the-counter market, or an employee benefit plan that files or furnishes financial statements with or to the SEC, may elect not to provide any or all of the following disclosures: 1. a Paragraph [606-10-50-18(b)](https://asc.understandingaccounting.org/asc/606/10/#606-10-50-18), which states that an entity shall disclose, for [performance obligations](https://asc.understandingaccounting.org/glossary/p/#performance-obligation "A promise in a contract with a customer to transfer to the customer either: A good or service (or a bundle of goods or services) that is distinct A series of distinct goods or services that are substantially the same and that have the same pattern of transfer to the customer.") satisfied over time, an explanation of why the methods used to recognize [revenue](https://asc.understandingaccounting.org/glossary/r/#revenue "Inflows or other enhancements of assets of an entity or settlements of its liabilities (or a combination of both) from delivering or producing goods, rendering services, or other activities that constitute the entity's ongoing major or central operations.") provide a faithful depiction of the transfer of goods or services to a [customer](https://asc.understandingaccounting.org/glossary/c/#customer "A party that has contracted with an entity to obtain goods or services that are an output of the entity's ordinary activities in exchange for consideration.") 2. b Paragraph [606-10-50-19](https://asc.understandingaccounting.org/asc/606/10/#606-10-50-19), which states that an entity shall disclose, for performance obligations satisfied at a point in time, the significant judgments made in evaluating when a customer obtains control of promised goods or services 3. c Paragraph [606-10-50-20](https://asc.understandingaccounting.org/asc/606/10/#606-10-50-20), which states that an entity shall disclose the methods, inputs, and assumptions used to determine the transaction price and to allocate the transaction price. However, if an entity elects not to provide the disclosures in paragraph [606-10-50-20](https://asc.understandingaccounting.org/asc/606/10/#606-10-50-20), the entity shall provide the disclosure in paragraph [606-10-50-20(b)](https://asc.understandingaccounting.org/asc/606/10/#606-10-50-20), which states that an entity shall disclose the methods, inputs, and assumptions used to assess whether an estimate of variable consideration is constrained. #### Practical Expedients ##### [606-10-50-22](https://asc.understandingaccounting.org/asc/606/10/#606-10-50-22) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:11.428Z to 2026-09-09T23:18:11.428Z Record version: sha256:772ec6e717e863366dd8c5aaa63146ee7fb29d53d804d0a9707ac6b13d1264ba Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If an entity elects to use the practical expedient in either paragraph [606-10-32-18](https://asc.understandingaccounting.org/asc/606/10/#606-10-32-18) (about the existence of a significant financing component) or paragraph [340-40-25-4](https://asc.understandingaccounting.org/asc/340/40/#340-40-25-4) (about the incremental costs of obtaining a [contract](https://asc.understandingaccounting.org/glossary/c/#contract "An agreement between two or more parties that creates enforceable rights and obligations.")), the entity shall disclose that fact. ##### [606-10-50-23](https://asc.understandingaccounting.org/asc/606/10/#606-10-50-23) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:11.428Z to 2026-09-09T23:18:11.428Z Record version: sha256:4af0d1387fec572baec8f458d0171c0e92ad3da1646878af41ebc15fe7037125 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An entity, except for a [public business entity](https://asc.understandingaccounting.org/glossary/p/#public-business-entity "A public business entity is a business entity meeting any one of the criteria below. Neither a not-for-profit entity nor an employee benefit plan is a business entity. It is required by the U.S. Securities and Exchange Commission (SEC) to file or furnish financial statements, or does file or furnish financial statements (including voluntary filers), with the SEC (including other entities whose financial statements or financial information are required to be or are included in a filing). It is required by the Securities Exchange Act of 1934 (the Act), as amended, or rules or regulations promulgated under the Act, to file or furnish financial statements with a regulatory agency other than the SEC. It is required to file or furnish financial statements with a foreign or domestic regulatory agency in preparation for the sale of or for purposes of issuing securities that are not subject to contractual restrictions on transfer. It has issued, or is a conduit bond obligor for, securities that are traded, listed, or quoted on an exchange or an over-the-counter market. It has one or more securities that are not subject to contractual restrictions on transfer, and it is required by law, contract, or regulation to prepare U.S. GAAP financial statements (including notes) and make them publicly available on a periodic basis (for example, interim or annual periods). An entity must meet both of these conditions to meet this criterion. An entity may meet the definition of a public business entity solely because its financial statements or financial information is included in another entity's filing with the SEC. In that case, the entity is only a public business entity for purposes of financial statements that are filed or furnished with the SEC."), a [not-for-profit entity](https://asc.understandingaccounting.org/glossary/n/#not-for-profit-entity "An entity that possesses the following characteristics, in varying degrees, that distinguish it from a business entity: Contributions of significant amounts of resources from resource providers who do not expect commensurate or proportionate pecuniary return Operating purposes other than to provide goods or services at a profit Absence of ownership interests like those of business entities. Entities that clearly fall outside this definition include the following: All investor-owned entities Entities that provide dividends, lower costs, or other economic benefits directly and proportionately to their owners, members, or participants, such as mutual insurance entities, credit unions, farm and rural electric cooperatives, and employee benefit plans.") that has issued, or is a conduit bond obligor for, securities that are traded, listed, or quoted on an exchange or an over-the-counter market, or an employee benefit plan that files or furnishes financial statements with or to the SEC, may elect not to provide the disclosures in paragraph [606-10-50-22](https://asc.understandingaccounting.org/asc/606/10/#606-10-50-22). Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:32d47f1b13c89cd7229890cd49fcc064a4da53c923f82e87981d0b62f9abb934 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 606-10-55: 55 Implementation Guidance and Illustrations [Read section](https://asc.understandingaccounting.org/asc/606/10/#55-implementation-guidance-and-illustrations) SEC content: no ##### [606-10-55-1](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-1) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:742cb356ff571ea3fbfc2df722fd829d565472f561a78d731a2cb1472a76eb21 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The Implementation Guidance and Illustrations Section is organized as follows: 1. a Implementation guidance is provided in paragraphs [606-10-55-2 through 55-91](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-2) with a listing of contents in paragraph [606-10-55-3](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-3). 2. b Illustrations are provided in paragraphs [606-10-55-92 through 55-413](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-92) with a listing of contents in paragraph [606-10-55-93](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-93). #### Implementation Guidance ##### [606-10-55-2](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-2) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:21d9e68fec2c1e46dff5203a9a6598fe117953472adb715538784ece3fa17a24 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Paragraphs [606-10-55-2 through 55-91](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-2) are an integral part of this Topic. These paragraphs provide additional guidance that addresses the application of the guidance on [revenue](https://asc.understandingaccounting.org/glossary/r/#revenue "Inflows or other enhancements of assets of an entity or settlements of its liabilities (or a combination of both) from delivering or producing goods, rendering services, or other activities that constitute the entity's ongoing major or central operations.") from [contracts](https://asc.understandingaccounting.org/glossary/c/#contract "An agreement between two or more parties that creates enforceable rights and obligations.") with [customers](https://asc.understandingaccounting.org/glossary/c/#customer "A party that has contracted with an entity to obtain goods or services that are an output of the entity's ordinary activities in exchange for consideration."). ##### [606-10-55-3](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-3) Pending content: yes Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:6513eadf37f28043f20903ca9e91bec433d3cfc3e187a96b22280a6b7284a02c Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This implementation guidance is organized into the following categories: 1. a Assessing collectibility (paragraphs [606-10-55-3A through 55-3C](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-3A) ) 2. aa [Performance obligations](https://asc.understandingaccounting.org/glossary/p/#performance-obligation "A promise in a contract with a customer to transfer to the customer either: A good or service (or a bundle of goods or services) that is distinct A series of distinct goods or services that are substantially the same and that have the same pattern of transfer to the customer.") satisfied over time (paragraphs [606-10-55-4 through 55-15](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-4) ) 3. b Methods for measuring progress toward complete satisfaction of a performance obligation (paragraphs [606-10-55-16 through 55-21](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-16) ) 4. c Sale with a right of return (paragraphs [606-10-55-22 through 55-29](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-22) ) 5. d Warranties (paragraphs [606-10-55-30 through 55-35](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-30) ) 6. e Principal versus agent considerations (paragraphs [606-10-55-36 through 55-40](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-36) ) 7. f Customer options for additional goods or services (paragraphs [606-10-55-41 through 55-45](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-41) ) 8. g Customers' unexercised rights (paragraphs [606-10-55-46 through 55-49](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-46) ) 9. h Nonrefundable upfront fees (and some related costs) (paragraphs [606-10-55-50 through 55-53](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-50) ) 10. i Licensing (paragraphs [606-10-55-54 through 55-60](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-54) and [606-10-55-62 through 55-65B](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-62)) 11. j Repurchase agreements (paragraphs [606-10-55-66 through 55-78](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-66) ) 12. k Consignment arrangements (paragraphs [606-10-55-79 through 55-80](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-79) ) 13. l Bill-and-hold arrangements (paragraphs [606-10-55-81 through 55-84](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-81) ) 14. m Customer acceptance (paragraphs [606-10-55-85 through 55-88](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-85) ) 15. mm Equity instruments granted as consideration payable to a customer (paragraphs [606-10-55-88A through 55-88B](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-88A) ) 16. n Disclosure of disaggregated revenue (paragraphs [606-10-55-89 through 55-91](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-89) ). Transition date:(P) December 16, 2026; (N) December 16, 2026Transition guidance: [606-10-65-2](https://asc.understandingaccounting.org/asc/606/10/#606-10-65-2)This implementation guidance is organized into the following categories: 1. a Assessing collectibility (paragraphs [606-10-55-3A through 55-3C](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-3A) ) 2. aa [Performance obligations](https://asc.understandingaccounting.org/glossary/p/#performance-obligation "A promise in a contract with a customer to transfer to the customer either: A good or service (or a bundle of goods or services) that is distinct A series of distinct goods or services that are substantially the same and that have the same pattern of transfer to the customer.") satisfied over time (paragraphs [606-10-55-4 through 55-15](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-4) ) 3. b Methods for measuring progress toward complete satisfaction of a performance obligation (paragraphs [606-10-55-16 through 55-21](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-16) ) 4. c Sale with a right of return (paragraphs [606-10-55-22 through 55-29](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-22) ) 5. d Warranties (paragraphs [606-10-55-30 through 55-35](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-30) ) 6. e Principal versus agent considerations (paragraphs [606-10-55-36 through 55-40](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-36) ) 7. f Customer options for additional goods or services (paragraphs [606-10-55-41 through 55-45](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-41) ) 8. g Customers' unexercised rights (paragraphs [606-10-55-46 through 55-49](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-46) ) 9. h Nonrefundable upfront fees (and some related costs) (paragraphs [606-10-55-50 through 55-53](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-50) ) 10. i Licensing (paragraphs [606-10-55-54 through 55-60](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-54) and [606-10-55-62 through 55-65B](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-62)) 11. j Repurchase agreements (paragraphs [606-10-55-66 through 55-78](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-66) ) 12. k Consignment arrangements (paragraphs [606-10-55-79 through 55-80](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-79) ) 13. l Bill-and-hold arrangements (paragraphs [606-10-55-81 through 55-84](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-81) ) 14. m Customer acceptance (paragraphs [606-10-55-85 through 55-88](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-85) ) 15. mm Share-based consideration payable to a customer (paragraphs [606-10-55-88A through 55-88C](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-88A) ) 16. n Disclosure of disaggregated revenue (paragraphs [606-10-55-89 through 55-91](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-89) ). ##### [606-10-55-3A](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-3A) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:fddc409fa3447302a893476ff8ac9c529699e89c7ae5efc326cd80c0170e8a0a Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Paragraph [606-10-25-1(e)](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-1) requires an entity to assess whether it is [probable](https://asc.understandingaccounting.org/glossary/p/#probable "The future event or events are likely to occur.") that the entity will collect substantially all of the consideration to which it will be entitled in exchange for the goods or services that will be transferred to the [customer](https://asc.understandingaccounting.org/glossary/c/#customer "A party that has contracted with an entity to obtain goods or services that are an output of the entity's ordinary activities in exchange for consideration."). The assessment, which is part of identifying whether there is a [contract](https://asc.understandingaccounting.org/glossary/c/#contract "An agreement between two or more parties that creates enforceable rights and obligations.") with a customer, is based on whether the customer has the ability and intention to pay the consideration to which the entity will be entitled in exchange for the goods or services that will be transferred to the customer. The objective of this assessment is to evaluate whether there is a substantive transaction between the entity and the customer, which is a necessary condition for the contract to be accounted for under the revenue model in this Topic. ##### [606-10-55-3B](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-3B) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:1ef85b005b082f668f4e290619b424755ddb32f664f1077df6165feb80062cad Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The collectibility assessment in paragraph [606-10-25-1(e)](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-1) is partly a forward-looking assessment. It requires an entity to use judgment and consider all of the facts and circumstances, including the entity's customary business practices and its knowledge of the customer, in determining whether it is probable that the entity will collect substantially all of the consideration to which it will be entitled in exchange for the goods or services that the entity expects to transfer to the customer. The assessment is not necessarily based on the customer's ability and intention to pay the entire amount of promised consideration for the entire duration of the contract. ##### [606-10-55-3C](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-3C) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:0d14ce10fdc5d8ade5b252738821e5e2ac7cdc768a60e35cdb38d3de94a0f732 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. When assessing whether a contract meets the criterion in paragraph [606-10-25-1(e)](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-1), an entity should determine whether the contractual terms and its customary business practices indicate that the entity's exposure to credit risk is less than the entire consideration promised in the contract because the entity has the ability to mitigate its credit risk. Examples of contractual terms or customary business practices that might mitigate the entity's credit risk include the following: 1. a Payment terms—In some contracts, payment terms limit an entity's exposure to credit risk. For example, a customer may be required to pay a portion of the consideration promised in the contract before the entity transfers promised goods or services to the customer. In those cases, any consideration that will be received before the entity transfers promised goods or services to the customer would not be subject to credit risk. 2. b The ability to stop transferring promised goods or services—An entity may limit its exposure to credit risk if it has the right to stop transferring additional goods or services to a customer in the event that the customer fails to pay consideration when it is due. In those cases, an entity should assess only the collectibility of the consideration to which it will be entitled in exchange for the goods or services that will be transferred to the customer on the basis of the entity's rights and customary business practices. Therefore, if the customer fails to perform as promised and, consequently, the entity would respond to the customer's failure to perform by not transferring additional goods or services to the customer, the entity would not consider the likelihood of payment for the promised goods or services that will not be transferred under the contract. An entity's ability to repossess an asset transferred to a customer should not be considered for the purpose of assessing the entity's ability to mitigate its exposure to credit risk. ##### [606-10-55-4](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-4) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:e464a65731615dc4cc7d8a0f96c87335068800c7ddcb137c74f454c57ea0ee22 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. In accordance with paragraph [606-10-25-27](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-27), a [performance obligation](https://asc.understandingaccounting.org/glossary/p/#performance-obligation "A promise in a contract with a customer to transfer to the customer either: A good or service (or a bundle of goods or services) that is distinct A series of distinct goods or services that are substantially the same and that have the same pattern of transfer to the customer.") is satisfied over time if one of the following criteria is met: 1. a The [customer](https://asc.understandingaccounting.org/glossary/c/#customer "A party that has contracted with an entity to obtain goods or services that are an output of the entity's ordinary activities in exchange for consideration.") simultaneously receives and consumes the benefits provided by the entity's performance as the entity performs (see paragraphs [606-10-55-5 through 55-6](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-5) ). 2. b The entity's performance creates or enhances an asset (for example, work in process) that the customer controls as the asset is created or enhanced (see paragraph [606-10-55-7](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-7)). 3. c The entity's performance does not create an asset with an alternative use to the entity (see paragraphs [606-10-55-8 through 55-10](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-8) ), and the entity has an enforceable right to payment for performance completed to date (see paragraphs [606-10-55-11 through 55-15](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-11) ). ##### [606-10-55-5](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-5) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:86ba686b16d49a66564d55b51244a10fc725b1e47608aa5dd96f4f855edd67a8 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. For some types of [performance obligations](https://asc.understandingaccounting.org/glossary/p/#performance-obligation "A promise in a contract with a customer to transfer to the customer either: A good or service (or a bundle of goods or services) that is distinct A series of distinct goods or services that are substantially the same and that have the same pattern of transfer to the customer."), the assessment of whether a [customer](https://asc.understandingaccounting.org/glossary/c/#customer "A party that has contracted with an entity to obtain goods or services that are an output of the entity's ordinary activities in exchange for consideration.") receives the benefits of an entity's performance as the entity performs and simultaneously consumes those benefits as they are received will be straightforward. Examples include routine or recurring services (such as a cleaning service) in which the receipt and simultaneous consumption by the customer of the benefits of the entity's performance can be readily identified. ##### [606-10-55-6](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-6) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:a6243d59ae5d229335d802e4d8abd0e26ffd34b2f536d21d4eecc497f539a101 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. For other types of performance obligations, an entity may not be able to readily identify whether a customer simultaneously receives and consumes the benefits from the entity's performance as the entity performs. In those circumstances, a performance obligation is satisfied over time if an entity determines that another entity would not need to substantially reperform the work that the entity has completed to date if that other entity were to fulfill the remaining performance obligation to the customer. In determining whether another entity would not need to substantially reperform the work the entity has completed to date, an entity should make both of the following assumptions: 1. a Disregard potential contractual restrictions or practical limitations that otherwise would prevent the entity from transferring the remaining performance obligation to another entity 2. b Presume that another entity fulfilling the remainder of the performance obligation would not have the benefit of any asset that is presently controlled by the entity and that would remain controlled by the entity if the performance obligation were to transfer to another entity. ##### [606-10-55-7](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-7) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:0631f037904a19c841086816db4cbb75434495b5b6e38b30a038d96d68ead529 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. In determining whether a [customer](https://asc.understandingaccounting.org/glossary/c/#customer "A party that has contracted with an entity to obtain goods or services that are an output of the entity's ordinary activities in exchange for consideration.") controls an asset as it is created or enhanced in accordance with paragraph [606-10-25-27(b)](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-27), an entity should apply the guidance on control in paragraphs [606-10-25-23 through 25-26](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-23) and [606-10-25-30](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-30). The asset that is being created or enhanced (for example, a work in process asset) could be either tangible or intangible. ##### [606-10-55-8](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-8) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:e46dce22d387d68daf030694f33513ca7b12a40ca11192f132a87727ffb27647 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. In assessing whether an asset has an alternative use to an entity in accordance with paragraph [606-10-25-28](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-28), an entity should consider the effects of contractual restrictions and practical limitations on the entity's ability to readily direct that asset for another use, such as selling it to a different [customer](https://asc.understandingaccounting.org/glossary/c/#customer "A party that has contracted with an entity to obtain goods or services that are an output of the entity's ordinary activities in exchange for consideration."). The possibility of the [contract](https://asc.understandingaccounting.org/glossary/c/#contract "An agreement between two or more parties that creates enforceable rights and obligations.") with the customer being terminated is not a relevant consideration in assessing whether the entity would be able to readily direct the asset for another use. ##### [606-10-55-9](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-9) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:aa9ce8eea5f79f7f413153e1e44ce673d5caac00c9aec360f28dd97aa779f0f5 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. A contractual restriction on an entity's ability to direct an asset for another use must be substantive for the asset not to have an alternative use to the entity. A contractual restriction is substantive if a customer could enforce its rights to the promised asset if the entity sought to direct the asset for another use. In contrast, a contractual restriction is not substantive if, for example, an asset is largely interchangeable with other assets that the entity could transfer to another customer without breaching the contract and without incurring significant costs that otherwise would not have been incurred in relation to that contract. ##### [606-10-55-10](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-10) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:06065681ec1edcc9f8a233577e74aee8a95bffe5b8fb7a87c2a0150c7f4ccae4 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. A practical limitation on an entity's ability to direct an asset for another use exists if an entity would incur significant economic losses to direct the asset for another use. A significant economic loss could arise because the entity either would incur significant costs to rework the asset or would only be able to sell the asset at a significant loss. For example, an entity may be practically limited from redirecting assets that either have design specifications that are unique to a customer or are located in remote areas. ##### [606-10-55-11](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-11) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:3442d4af91691e219cfcab499a4189bc1ea10041e27ba39ab8e374d41fc12082 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. In accordance with paragraph [606-10-25-29](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-29), an entity has a right to payment for performance completed to date if the entity would be entitled to an amount that at least compensates the entity for its performance completed to date in the event that the [customer](https://asc.understandingaccounting.org/glossary/c/#customer "A party that has contracted with an entity to obtain goods or services that are an output of the entity's ordinary activities in exchange for consideration.") or another party terminates the [contract](https://asc.understandingaccounting.org/glossary/c/#contract "An agreement between two or more parties that creates enforceable rights and obligations.") for reasons other than the entity's failure to perform as promised. An amount that would compensate an entity for performance completed to date would be an amount that approximates the selling price of the goods or services transferred to date (for example, recovery of the costs incurred by an entity in satisfying the [performance obligation](https://asc.understandingaccounting.org/glossary/p/#performance-obligation "A promise in a contract with a customer to transfer to the customer either: A good or service (or a bundle of goods or services) that is distinct A series of distinct goods or services that are substantially the same and that have the same pattern of transfer to the customer.") plus a reasonable profit margin) rather than compensation for only the entity's potential loss of profit if the contract were to be terminated. Compensation for a reasonable profit margin need not equal the profit margin expected if the contract was fulfilled as promised, but an entity should be entitled to compensation for either of the following amounts: 1. a A proportion of the expected profit margin in the contract that reasonably reflects the extent of the entity's performance under the contract before termination by the customer (or another party) 2. b A reasonable return on the entity's cost of capital for similar contracts (or the entity's typical operating margin for similar contracts) if the contract-specific margin is higher than the return the entity usually generates from similar contracts. ##### [606-10-55-12](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-12) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:729e54198537679fb853619d71a7be6fde81b7fab45638a7df85a4117cf71493 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An entity's right to payment for performance completed to date need not be a present unconditional right to payment. In many cases, an entity will have an unconditional right to payment only at an agreed-upon milestone or upon complete satisfaction of the performance obligation. In assessing whether it has a right to payment for performance completed to date, an entity should consider whether it would have an enforceable right to demand or retain payment for performance completed to date if the contract were to be terminated before completion for reasons other than the entity's failure to perform as promised. ##### [606-10-55-13](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-13) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:5a8a69e8ba55cf1bd83e0a59736e093ebdfa260b1d6b2f46fb693866e2ce8b07 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. In some contracts, a customer may have a right to terminate the contract only at specified times during the life of the contract or the customer might not have any right to terminate the contract. If a customer acts to terminate a contract without having the right to terminate the contract at that time (including when a customer fails to perform its obligations as promised), the contract (or other laws) might entitle the entity to continue to transfer to the customer the goods or services promised in the contract and require the customer to pay the consideration promised in exchange for those goods or services. In those circumstances, an entity has a right to payment for performance completed to date because the entity has a right to continue to perform its obligations in accordance with the contract and to require the customer to perform its obligations (which include paying the promised consideration). ##### [606-10-55-14](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-14) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:6b183ac8604c57ef31c1017580d5a96219e5d219c7bba84aca20f64be60e839e Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. In assessing the existence and enforceability of a right to payment for performance completed to date, an entity should consider the contractual terms as well as any legislation or legal precedent that could supplement or override those contractual terms. This would include an assessment of whether: 1. a Legislation, administrative practice, or legal precedent confers upon the entity a right to payment for performance to date even though that right is not specified in the contract with the customer. 2. b Relevant legal precedent indicates that similar rights to payment for performance completed to date in similar contracts have no binding legal effect. 3. c An entity's customary business practices of choosing not to enforce a right to payment has resulted in the right being rendered unenforceable in that legal environment. However, notwithstanding that an entity may choose to waive its right to payment in similar contracts, an entity would continue to have a right to payment to date if, in the contract with the customer, its right to payment for performance to date remains enforceable. ##### [606-10-55-15](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-15) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:d181d559b14884a8798002be2d058dae8d5a9d1c6798c8b3b596ed7b4d8a4c5f Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The payment schedule specified in a contract does not necessarily indicate whether an entity has an enforceable right to payment for performance completed to date. Although the payment schedule in a contract specifies the timing and amount of consideration that is payable by a customer, the payment schedule might not necessarily provide evidence of the entity's right to payment for performance completed to date. This is because, for example, the contract could specify that the consideration received from the customer is refundable for reasons other than the entity failing to perform as promised in the contract. ##### [606-10-55-16](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-16) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:1ee81d3acf4b37bc9013df4a4530387f017053f5433abd94d767810e8a200b6d Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Methods that can be used to measure an entity's progress toward complete satisfaction of a [performance obligation](https://asc.understandingaccounting.org/glossary/p/#performance-obligation "A promise in a contract with a customer to transfer to the customer either: A good or service (or a bundle of goods or services) that is distinct A series of distinct goods or services that are substantially the same and that have the same pattern of transfer to the customer.") satisfied over time in accordance with paragraphs [606-10-25-27 through 25-29](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-27) include the following: 1. a Output methods (see paragraphs [606-10-55-17 through 55-19](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-17) ) 2. b Input methods (see paragraphs [606-10-55-20 through 55-21](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-20) ). ##### [606-10-55-17](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-17) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:8f9e395ede875416309cadcbe15e2a83e83232970fa80ba417ea13e13fdc546d Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Output methods recognize [revenue](https://asc.understandingaccounting.org/glossary/r/#revenue "Inflows or other enhancements of assets of an entity or settlements of its liabilities (or a combination of both) from delivering or producing goods, rendering services, or other activities that constitute the entity's ongoing major or central operations.") on the basis of direct measurements of the value to the [customer](https://asc.understandingaccounting.org/glossary/c/#customer "A party that has contracted with an entity to obtain goods or services that are an output of the entity's ordinary activities in exchange for consideration.") of the goods or services transferred to date relative to the remaining goods or services promised under the [contract](https://asc.understandingaccounting.org/glossary/c/#contract "An agreement between two or more parties that creates enforceable rights and obligations."). Output methods include methods such as surveys of performance completed to date, appraisals of results achieved, milestones reached, time elapsed, and units produced or units delivered. When an entity evaluates whether to apply an output method to measure its progress, the entity should consider whether the output selected would faithfully depict the entity's performance toward complete satisfaction of the [performance obligation](https://asc.understandingaccounting.org/glossary/p/#performance-obligation "A promise in a contract with a customer to transfer to the customer either: A good or service (or a bundle of goods or services) that is distinct A series of distinct goods or services that are substantially the same and that have the same pattern of transfer to the customer."). An output method would not provide a faithful depiction of the entity's performance if the output selected would fail to measure some of the goods or services for which control has transferred to the customer. For example, output methods based on units produced or units delivered would not faithfully depict an entity's performance in satisfying a performance obligation if, at the end of the reporting period, the entity's performance has produced work in process or finished goods controlled by the customer that are not included in the measurement of the output. ##### [606-10-55-18](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-18) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:2a36aa15aa5c294dd8d92d68e11c9c5e3a5a92752c2c3b22b5bcd5d05ea5455e Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. As a practical expedient, if an entity has a right to consideration from a customer in an amount that corresponds directly with the value to the customer of the entity's performance completed to date (for example, a service contract in which an entity bills a fixed amount for each hour of service provided), the entity may recognize revenue in the amount to which the entity has a right to invoice. ##### [606-10-55-19](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-19) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:0a9d0bd0519374a39437a9ff3c244c74d2660e2c97fc732d035ba59185cfad52 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The disadvantages of output methods are that the outputs used to measure progress may not be directly observable and the information required to apply them may not be available to an entity without undue cost. Therefore, an input method may be necessary. ##### [606-10-55-20](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-20) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:b5217e163da5bbfbb29faa724f03f0050aa8c5b1d437096934f143c7885e16bd Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Input methods recognize [revenue](https://asc.understandingaccounting.org/glossary/r/#revenue "Inflows or other enhancements of assets of an entity or settlements of its liabilities (or a combination of both) from delivering or producing goods, rendering services, or other activities that constitute the entity's ongoing major or central operations.") on the basis of the entity's efforts or inputs to the satisfaction of a [performance obligation](https://asc.understandingaccounting.org/glossary/p/#performance-obligation "A promise in a contract with a customer to transfer to the customer either: A good or service (or a bundle of goods or services) that is distinct A series of distinct goods or services that are substantially the same and that have the same pattern of transfer to the customer.") (for example, resources consumed, labor hours expended, costs incurred, time elapsed, or machine hours used) relative to the total expected inputs to the satisfaction of that performance obligation. If the entity's efforts or inputs are expended evenly throughout the performance period, it may be appropriate for the entity to recognize revenue on a straight-line basis. ##### [606-10-55-21](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-21) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:7701e0b2cf6ac0b692dec2d8c838b5857d8bc26cec7ac8e8bea99b44f1425fe9 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. A shortcoming of input methods is that there may not be a direct relationship between an entity's inputs and the transfer of control of goods or services to a [customer](https://asc.understandingaccounting.org/glossary/c/#customer "A party that has contracted with an entity to obtain goods or services that are an output of the entity's ordinary activities in exchange for consideration."). Therefore, an entity should exclude from an input method the effects of any inputs that, in accordance with the objective of measuring progress in paragraph [606-10-25-31](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-31), do not depict the entity's performance in transferring control of goods or services to the customer. For instance, when using a cost-based input method, an adjustment to the measure of progress may be required in the following circumstances: 1. a When a cost incurred does not contribute to an entity's progress in satisfying the performance obligation. For example, an entity would not recognize revenue on the basis of costs incurred that are attributable to significant inefficiencies in the entity's performance that were not reflected in the price of the contract (for example, the costs of unexpected amounts of wasted materials, labor, or other resources that were incurred to satisfy the performance obligation). 2. b When a cost incurred is not proportionate to the entity's progress in satisfying the performance obligation. In those circumstances, the best depiction of the entity's performance may be to adjust the input method to recognize revenue only to the extent of that cost incurred. For example, a faithful depiction of an entity's performance might be to recognize revenue at an amount equal to the cost of a good used to satisfy a performance obligation if the entity expects at contract inception that all of the following conditions would be met: 1. 1 The good is not distinct. 2. 2 The customer is expected to obtain control of the good significantly before receiving services related to the good. 3. 3 The cost of the transferred good is significant relative to the total expected costs to completely satisfy the performance obligation. 4. 4 The entity procures the good from a third party and is not significantly involved in designing and manufacturing the good (but the entity is acting as a principal in accordance with paragraphs [606-10-55-36 through 55-40](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-36) ). ##### [606-10-55-22](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-22) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:5a05b3aa5ab26355949cd0e5f7fb9fbec4fcbfc89a6caa722d4a5d9105b92d1e Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. In some [contracts](https://asc.understandingaccounting.org/glossary/c/#contract "An agreement between two or more parties that creates enforceable rights and obligations."), an entity transfers control of a product to a [customer](https://asc.understandingaccounting.org/glossary/c/#customer "A party that has contracted with an entity to obtain goods or services that are an output of the entity's ordinary activities in exchange for consideration.") and also grants the customer the right to return the product for various reasons (such as dissatisfaction with the product) and receive any combination of the following: 1. a A full or partial refund of any consideration paid 2. b A credit that can be applied against amounts owed, or that will be owed, to the entity 3. c Another product in exchange. ##### [606-10-55-23](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-23) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:61fe178b605f860a221246158a6ef97e12325fd211b47af593fa8674f25562e9 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. To account for the transfer of products with a right of return (and for some services that are provided subject to a refund), an entity should recognize all of the following: 1. a [Revenue](https://asc.understandingaccounting.org/glossary/r/#revenue "Inflows or other enhancements of assets of an entity or settlements of its liabilities (or a combination of both) from delivering or producing goods, rendering services, or other activities that constitute the entity's ongoing major or central operations.") for the transferred products in the amount of consideration to which the entity expects to be entitled (therefore, revenue would not be recognized for the products expected to be returned) 2. b A refund liability 3. c An asset (and corresponding adjustment to cost of sales) for its right to recover products from customers on settling the refund liability. ##### [606-10-55-24](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-24) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:cb060404a62b0120e1ce6ac0914e1cd9769b33aaec5035eb494fde5eb1e6210f Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An entity's promise to stand ready to accept a returned product during the return period should not be accounted for as a [performance obligation](https://asc.understandingaccounting.org/glossary/p/#performance-obligation "A promise in a contract with a customer to transfer to the customer either: A good or service (or a bundle of goods or services) that is distinct A series of distinct goods or services that are substantially the same and that have the same pattern of transfer to the customer.") in addition to the obligation to provide a refund. ##### [606-10-55-25](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-25) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:4d3448f8dc62419e73543455915d72589ab330bceab2d8ee21b419c1b529f89e Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An entity should apply the guidance in paragraphs [606-10-32-2 through 32-27](https://asc.understandingaccounting.org/asc/606/10/#606-10-32-2) (including the guidance on constraining estimates of variable consideration in paragraphs [606-10-32-11 through 32-13](https://asc.understandingaccounting.org/asc/606/10/#606-10-32-11) ) to determine the amount of consideration to which the entity expects to be entitled (that is, excluding the products expected to be returned). For any amounts received (or receivable) for which an entity does not expect to be entitled, the entity should not recognize revenue when it transfers products to customers but should recognize those amounts received (or receivable) as a refund liability. Subsequently, at the end of each reporting period, the entity should update its assessment of amounts for which it expects to be entitled in exchange for the transferred products and make a corresponding change to the [transaction price](https://asc.understandingaccounting.org/glossary/t/#transaction-price "The amount of consideration to which an entity expects to be entitled in exchange for transferring promised goods or services to a customer, excluding amounts collected on behalf of third parties.") and, therefore, in the amount of revenue recognized. ##### [606-10-55-26](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-26) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:3f662df38a8100371541eac2fd3fc187236da327514a7b89fe6e8b7a8edde215 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An entity should update the measurement of the refund liability at the end of each reporting period for changes in expectations about the amount of refunds. An entity should recognize corresponding adjustments as revenue (or reductions of revenue). ##### [606-10-55-27](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-27) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:8850245a570e0439b3ced39db27fbadba41573efbd7212ba3bfa7361c4eb35fc Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An asset recognized for an entity's right to recover products from a customer on settling a refund liability initially should be measured by reference to the former carrying amount of the product (for example, inventory) less any expected costs to recover those products (including potential decreases in the value to the entity of returned products). At the end of each reporting period, an entity should update the measurement of the asset arising from changes in expectations about products to be returned. An entity should present the asset separately from the refund liability. ##### [606-10-55-28](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-28) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:5d7933cb60b38795bf0dfde46b52d3fbd9098cb0f8cd47cdc2091d14d491789c Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Exchanges by customers of one product for another of the same type, quality, condition, and price (for example, one color or size for another) are not considered returns for the purposes of applying the guidance in this Topic. ##### [606-10-55-29](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-29) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:f21bdffd2f55591b16ddffbe0b6edd217e25a8d8b903ebeee987e0bcda35c3b2 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Contracts in which a customer may return a defective product in exchange for a functioning product should be evaluated in accordance with the guidance on warranties in paragraphs [606-10-55-30 through 55-35](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-30) . ##### [606-10-55-30](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-30) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:189f4d008fb089d1725ceb93d5e3ed5c6162551f90dae10e042c89da34018523 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. It is common for an entity to provide (in accordance with the [contract](https://asc.understandingaccounting.org/glossary/c/#contract "An agreement between two or more parties that creates enforceable rights and obligations."), the law, or the entity's customary business practices) a warranty in connection with the sale of a product (whether a good or service). The nature of a warranty can vary significantly across industries and contracts. Some warranties provide a [customer](https://asc.understandingaccounting.org/glossary/c/#customer "A party that has contracted with an entity to obtain goods or services that are an output of the entity's ordinary activities in exchange for consideration.") with assurance that the related product will function as the parties intended because it complies with agreed-upon specifications. Other warranties provide the customer with a service in addition to the assurance that the product complies with agreed-upon specifications. ##### [606-10-55-31](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-31) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:f0fa274fe675facb17577901e522fed3e9586f1839edf822af83731a3796a2b8 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If a customer has the option to purchase a warranty separately (for example, because the warranty is priced or negotiated separately), the warranty is a distinct service because the entity promises to provide the service to the customer in addition to the product that has the functionality described in the contract. In those circumstances, an entity should account for the promised warranty as a [performance obligation](https://asc.understandingaccounting.org/glossary/p/#performance-obligation "A promise in a contract with a customer to transfer to the customer either: A good or service (or a bundle of goods or services) that is distinct A series of distinct goods or services that are substantially the same and that have the same pattern of transfer to the customer.") in accordance with paragraphs [606-10-25-14 through 25-22](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-14) and allocate a portion of the [transaction price](https://asc.understandingaccounting.org/glossary/t/#transaction-price "The amount of consideration to which an entity expects to be entitled in exchange for transferring promised goods or services to a customer, excluding amounts collected on behalf of third parties.") to that performance obligation in accordance with paragraphs [606-10-32-28 through 32-41](https://asc.understandingaccounting.org/asc/606/10/#606-10-32-28) . ##### [606-10-55-32](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-32) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:969df3cff803ddda5a72673a84e769050daab41d25e7891d817949a66c0f3783 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If a customer does not have the option to purchase a warranty separately, an entity should account for the warranty in accordance with the guidance on product warranties in Subtopic 460-10 on guarantees, unless the promised warranty, or a part of the promised warranty, provides the customer with a service in addition to the assurance that the product complies with agreed-upon specifications. ##### [606-10-55-33](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-33) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:f1003420db273a201e790bc8d773dda273c4e9cdb8a2a301c10633dec20f9c56 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. In assessing whether a warranty provides a customer with a service in addition to the assurance that the product complies with agreed-upon specifications, an entity should consider factors such as: 1. a Whether the warranty is required by law—If the entity is required by law to provide a warranty, the existence of that law indicates that the promised warranty is not a performance obligation because such requirements typically exist to protect customers from the risk of purchasing defective products. 2. b The length of the warranty coverage period—The longer the coverage period, the more likely it is that the promised warranty is a performance obligation because it is more likely to provide a service in addition to the assurance that the product complies with agreed-upon specifications. 3. c The nature of the tasks that the entity promises to perform—If it is necessary for an entity to perform specified tasks to provide the assurance that a product complies with agreed-upon specifications (for example, a return shipping service for a defective product), then those tasks likely do not give rise to a performance obligation. ##### [606-10-55-34](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-34) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:86a7d451df15d41b118815a2cfb428f9333f387ee2b1cede075fd78f5cad96ec Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If a warranty, or a part of a warranty, provides a customer with a service in addition to the assurance that the product complies with agreed-upon specifications, the promised service is a performance obligation. Therefore, an entity should allocate the transaction price to the product and the service. If an entity promises both an assurance-type warranty and a service-type warranty but cannot reasonably account for them separately, the entity should account for both of the warranties together as a single performance obligation. ##### [606-10-55-35](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-35) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:0d62d637dd7075c639e17277b3c1cd5f9f85b04d5faef41a96b8e20494b8f300 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. A law that requires an entity to pay compensation if its products cause harm or damage does not give rise to a performance obligation. For example, a manufacturer might sell products in a jurisdiction in which the law holds the manufacturer liable for any damages (for example, to personal property) that might be caused by a consumer using a product for its intended purpose. Similarly, an entity's promise to indemnify the customer for liabilities and damages arising from claims of patent, copyright, trademark, or other infringement by the entity's products does not give rise to a performance obligation. The entity should account for such obligations in accordance with the guidance on loss contingencies in Subtopic 450-20 on contingencies. ##### [606-10-55-36](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-36) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:98d73e636cdee9958c0f3e78c7e8b6e6ed7520e181425f066608ffb1af21db8c Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. When another party is involved in providing goods or services to a [customer](https://asc.understandingaccounting.org/glossary/c/#customer "A party that has contracted with an entity to obtain goods or services that are an output of the entity's ordinary activities in exchange for consideration."), the entity should determine whether the nature of its promise is a [performance obligation](https://asc.understandingaccounting.org/glossary/p/#performance-obligation "A promise in a contract with a customer to transfer to the customer either: A good or service (or a bundle of goods or services) that is distinct A series of distinct goods or services that are substantially the same and that have the same pattern of transfer to the customer.") to provide the specified goods or services itself (that is, the entity is a principal) or to arrange for those goods or services to be provided by the other party (that is, the entity is an agent).An entity determines whether it is a principal or an agent for each specified good or service promised to the customer. A specified good or service is a distinct good or service (or a distinct bundle of goods or services) to be provided to the customer (see paragraphs [606-10-25-19 through 25-22](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-19) ). If a [contract](https://asc.understandingaccounting.org/glossary/c/#contract "An agreement between two or more parties that creates enforceable rights and obligations.") with a customer includes more than one specified good or service, an entity could be a principal for some specified goods or services and an agent for others. ##### [606-10-55-36A](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-36A) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:77a36f223af7ec99f538af952ee802cc0ea62c0b3a1dfc52ac8c67a154f963dc Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. To determine the nature of its promise (as described in paragraph [606-10-55-36](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-36)), the entity should: 1. a Identify the specified goods or services to be provided to the customer (which, for example, could be a right to a good or service to be provided by another party \[see paragraph [606-10-25-18](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-18)\]) 2. b Assess whether it controls (as described in paragraph [606-10-25-25](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-25)) each specified good or service before that good or service is transferred to the customer. ##### [606-10-55-37](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-37) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:ccdd52fd00dbe1e25dbdeccc77c39cebb6a7dfc964868e8cf77bb46a5d7c6e4e Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An entity is a principal if it controls the specified good or service before that good or service is transferred to a customer. However, an entity does not necessarily control a specified good if the entity obtains legal title to that good only momentarily before legal title is transferred to a customer. An entity that is a principal may satisfy its performance obligation to provide the specified good or service itself or it may engage another party (for example, a subcontractor) to satisfy some or all of the performance obligation on its behalf. ##### [606-10-55-37A](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-37A) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:afea729709c3a76eeaf6e8c962fcb95569177b306a549a274bed71535afb40b7 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. When another party is involved in providing goods or services to a customer, an entity that is a principal obtains control of any one of the following: 1. a A good or another asset from the other party that it then transfers to the customer. 2. b A right to a service to be performed by the other party, which gives the entity the ability to direct that party to provide the service to the customer on the entity's behalf. 3. c A good or service from the other party that it then combines with other goods or services in providing the specified good or service to the customer. For example, if an entity provides a significant service of integrating goods or services (see paragraph [606-10-25-21(a)](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-21)) provided by another party into the specified good or service for which the customer has contracted, the entity controls the specified good or service before that good or service is transferred to the customer. This is because the entity first obtains control of the inputs to the specified good or service (which include goods or services from other parties) and directs their use to create the combined output that is the specified good or service. ##### [606-10-55-37B](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-37B) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:f14fd80e758a8f9335d30a7c25813400252fbeae79e24e7f374a7dd4e007618a Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. When (or as) an entity that is a principal satisfies a performance obligation, the entity recognizes [revenue](https://asc.understandingaccounting.org/glossary/r/#revenue "Inflows or other enhancements of assets of an entity or settlements of its liabilities (or a combination of both) from delivering or producing goods, rendering services, or other activities that constitute the entity's ongoing major or central operations.") in the gross amount of consideration to which it expects to be entitled in exchange for the specified good or service transferred. ##### [606-10-55-38](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-38) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:c88b74515b15135e46273e1dc4809840d1c6145bb718d8b7694bc8c3f34f1944 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An entity is an agent if the entity's performance obligation is to arrange for the provision of the specified good or service by another party. An entity that is an agent does not control the specified good or service provided by another party before that good or service is transferred to the customer. When (or as) an entity that is an agent satisfies a performance obligation, the entity recognizes revenue in the amount of any fee or commission to which it expects to be entitled in exchange for arranging for the specified goods or services to be provided by the other party. An entity's fee or commission might be the net amount of consideration that the entity retains after paying the other party the consideration received in exchange for the goods or services to be provided by that party. ##### [606-10-55-39](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-39) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:3cd8766ad4e8d8b2dc6a725c9279f5f2cd094a6afb90b239b707da31b4d7ea98 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Indicators that an entity controls the specified good or service before it is transferred to the customer (and is therefore a principal \[see paragraph [606-10-55-37](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-37)\]) include, but are not limited to, the following: 1. a The entity is primarily responsible for fulfilling the promise to provide the specified good or service. This typically includes responsibility for the acceptability of the specified good or service (for example, primary responsibility for the good or service meeting customer specifications). If the entity is primarily responsible for fulfilling the promise to provide the specified good or service, this may indicate that the other party involved in providing the specified good or service is acting on the entity's behalf. 2. b The entity has inventory risk before the specified good or service has been transferred to a customer or after transfer of control to the customer (for example, if the customer has a right of return). For example, if the entity obtains, or commits to obtain, the specified good or service before obtaining a [contract](https://asc.understandingaccounting.org/glossary/c/#contract "An agreement between two or more parties that creates enforceable rights and obligations.") with a customer, that may indicate that the entity has the ability to direct the use of, and obtain substantially all of the remaining benefits from, the good or service before it is transferred to the customer. 3. c The entity has discretion in establishing the price for the specified good or service. Establishing the price that the customer pays for the specified good or service may indicate that the entity has the ability to direct the use of that good or service and obtain substantially all of the remaining benefits. However, an agent can have discretion in establishing prices in some cases. For example, an agent may have some flexibility in setting prices in order to generate additional revenue from its service of arranging for goods or services to be provided by other parties to customers. 4. d [Subparagraph superseded by Accounting Standards Update No. 2016-08](https://asc.understandingaccounting.org/updates/asu-2016-08/). 5. e [Subparagraph superseded by Accounting Standards Update No. 2016-08](https://asc.understandingaccounting.org/updates/asu-2016-08/). ##### [606-10-55-39A](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-39A) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:311baeb0eaa725bfc23f32b95909d392b2789711590f06a3c714e7b313c79255 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The indicators in paragraph [606-10-55-39](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-39) may be more or less relevant to the assessment of control depending on the nature of the specified good or service and the terms and conditions of the contract. In addition, different indicators may provide more persuasive evidence in different contracts. ##### [606-10-55-40](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-40) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:1bfdcefe145e1e3696ec6d925b66a13841b08bbe0feba1ac29fc0edb1c79fdc3 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If another entity assumes the entity's performance obligations and contractual rights in the contract so that the entity is no longer obliged to satisfy the performance obligation to transfer the specified good or service to the customer (that is, the entity is no longer acting as the principal), the entity should not recognize revenue for that performance obligation. Instead, the entity should evaluate whether to recognize revenue for satisfying a performance obligation to obtain a contract for the other party (that is, whether the entity is acting as an agent). ##### [606-10-55-41](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-41) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:2623a17c2b098a318cee2d4c60c4251d2ad935a4c6c3e6f862636ffef77a7a9e Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Customer options to acquire additional goods or services for free or at a discount come in many forms, including sales incentives, customer award credits (or points), contract renewal options, or other discounts on future goods or services. ##### [606-10-55-42](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-42) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:f387a8c2a70ff21d6dbb697f879aaab802fc120dae5d58dce54565caac7c8f9a Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If, in a [contract](https://asc.understandingaccounting.org/glossary/c/#contract "An agreement between two or more parties that creates enforceable rights and obligations."), an entity grants a [customer](https://asc.understandingaccounting.org/glossary/c/#customer "A party that has contracted with an entity to obtain goods or services that are an output of the entity's ordinary activities in exchange for consideration.") the option to acquire additional goods or services, that option gives rise to a [performance obligation](https://asc.understandingaccounting.org/glossary/p/#performance-obligation "A promise in a contract with a customer to transfer to the customer either: A good or service (or a bundle of goods or services) that is distinct A series of distinct goods or services that are substantially the same and that have the same pattern of transfer to the customer.") in the contract only if the option provides a material right to the customer that it would not receive without entering into that contract (for example, a discount that is incremental to the range of discounts typically given for those goods or services to that class of customer in that geographical area or market). If the option provides a material right to the customer, the customer in effect pays the entity in advance for future goods or services, and the entity recognizes [revenue](https://asc.understandingaccounting.org/glossary/r/#revenue "Inflows or other enhancements of assets of an entity or settlements of its liabilities (or a combination of both) from delivering or producing goods, rendering services, or other activities that constitute the entity's ongoing major or central operations.") when those future goods or services are transferred or when the option expires. ##### [606-10-55-43](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-43) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:4b1fa92833a60cc94b047ba34fbbe0ad18bccefed374e3c5951edc218fb06a45 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If a customer has the option to acquire an additional good or service at a price that would reflect the [standalone selling price](https://asc.understandingaccounting.org/glossary/s/#standalone-selling-price "The price at which an entity would sell a promised good or service separately to a customer.") for that good or service, that option does not provide the customer with a material right even if the option can be exercised only by entering into a previous contract. In those cases, the entity has made a marketing offer that it should account for in accordance with the guidance in this Topic only when the customer exercises the option to purchase the additional goods or services. ##### [606-10-55-44](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-44) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:ef6de0e30158be8bc11de35e1b8c5966eeacdab7f46ca369b1488398d840dd98 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Paragraph [606-10-32-29](https://asc.understandingaccounting.org/asc/606/10/#606-10-32-29) requires an entity to allocate the [transaction price](https://asc.understandingaccounting.org/glossary/t/#transaction-price "The amount of consideration to which an entity expects to be entitled in exchange for transferring promised goods or services to a customer, excluding amounts collected on behalf of third parties.") to performance obligations on a relative standalone selling price basis. If the standalone selling price for a customer's option to acquire additional goods or services is not directly observable, an entity should estimate it. That estimate should reflect the discount that the customer would obtain when exercising the option, adjusted for both of the following: 1. a Any discount that the customer could receive without exercising the option 2. b The likelihood that the option will be exercised. ##### [606-10-55-45](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-45) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:5e887ba4d0214b03a2b0542998d87377548cc044355f88d72428fcf0138db6ae Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If a customer has a material right to acquire future goods or services and those goods or services are similar to the original goods or services in the contract and are provided in accordance with the terms of the original contract, then an entity may, as a practical alternative to estimating the standalone selling price of the option, allocate the transaction price to the optional goods or services by reference to the goods or services expected to be provided and the corresponding expected consideration. Typically, those types of options are for contract renewals. ##### [606-10-55-46](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-46) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:7265960a3309ab4d5adbe9d907cf5bc06a23b5699afae6b303e36960e8f124ab Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. In accordance with paragraph [606-10-45-2](https://asc.understandingaccounting.org/asc/606/10/#606-10-45-2), upon receipt of a prepayment from a [customer](https://asc.understandingaccounting.org/glossary/c/#customer "A party that has contracted with an entity to obtain goods or services that are an output of the entity's ordinary activities in exchange for consideration."), an entity should recognize a [contract liability](https://asc.understandingaccounting.org/glossary/c/#contract-liability "An entity's obligation to transfer goods or services to a customer for which the entity has received consideration (or the amount is due) from the customer.") in the amount of the prepayment for its [performance obligation](https://asc.understandingaccounting.org/glossary/p/#performance-obligation "A promise in a contract with a customer to transfer to the customer either: A good or service (or a bundle of goods or services) that is distinct A series of distinct goods or services that are substantially the same and that have the same pattern of transfer to the customer.") to transfer, or to stand ready to transfer, goods or services in the future. An entity should derecognize that contract liability (and recognize [revenue](https://asc.understandingaccounting.org/glossary/r/#revenue "Inflows or other enhancements of assets of an entity or settlements of its liabilities (or a combination of both) from delivering or producing goods, rendering services, or other activities that constitute the entity's ongoing major or central operations.")) when it transfers those goods or services and, therefore, satisfies its performance obligation. ##### [606-10-55-47](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-47) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:8068f4e1631d96be6e8a775ed6c6e970f639ad86d09dc419c7f6106854d8d5e5 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. A customer's nonrefundable prepayment to an entity gives the customer a right to receive a good or service in the future (and obliges the entity to stand ready to transfer a good or service). However, customers may not exercise all of their contractual rights. Those unexercised rights are often referred to as breakage. ##### [606-10-55-48](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-48) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:eed2ca8f9a81b9bac28ba286eb20d4af5cd3bd026c23910b494fbd065089dcaa Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If an entity expects to be entitled to a breakage amount in a contract liability, the entity should recognize the expected breakage amount as revenue in proportion to the pattern of rights exercised by the customer. If an entity does not expect to be entitled to a breakage amount, the entity should recognize the expected breakage amount as revenue when the likelihood of the customer exercising its remaining rights becomes remote. To determine whether an entity expects to be entitled to a breakage amount, the entity should consider the guidance in paragraphs [606-10-32-11 through 32-13](https://asc.understandingaccounting.org/asc/606/10/#606-10-32-11) on constraining estimates of variable consideration. ##### [606-10-55-49](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-49) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:1c98eebf39a75b82298cd567c364885af5536886025d5432486ec6faf8f0c416 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An entity should recognize a liability (and not revenue) for any consideration received that is attributable to a customer's unexercised rights for which the entity is required to remit to another party, for example, a government entity in accordance with applicable unclaimed property laws. ##### [606-10-55-50](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-50) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:332c25b9d8227dd4237a6b098eb3e29347404abd7c5d3df47c7cba258e932a40 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. In some [contracts](https://asc.understandingaccounting.org/glossary/c/#contract "An agreement between two or more parties that creates enforceable rights and obligations."), an entity charges a [customer](https://asc.understandingaccounting.org/glossary/c/#customer "A party that has contracted with an entity to obtain goods or services that are an output of the entity's ordinary activities in exchange for consideration.") a nonrefundable upfront fee at or near contract inception. Examples include joining fees in health club membership contracts, activation fees in telecommunication contracts, setup fees in some services contracts, and initial fees in some supply contracts. ##### [606-10-55-51](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-51) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:b8959d897a437487738f12d417584ce7ab1170e3a2ef5102ab21f2fdf2895c70 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. To identify [performance obligations](https://asc.understandingaccounting.org/glossary/p/#performance-obligation "A promise in a contract with a customer to transfer to the customer either: A good or service (or a bundle of goods or services) that is distinct A series of distinct goods or services that are substantially the same and that have the same pattern of transfer to the customer.") in such contracts, an entity should assess whether the fee relates to the transfer of a promised good or service. In many cases, even though a nonrefundable upfront fee relates to an activity that the entity is required to undertake at or near contract inception to fulfill the contract, that activity does not result in the transfer of a promised good or service to the customer (see paragraph [606-10-25-17](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-17)). Instead, the upfront fee is an advance payment for future goods or services and, therefore, would be recognized as [revenue](https://asc.understandingaccounting.org/glossary/r/#revenue "Inflows or other enhancements of assets of an entity or settlements of its liabilities (or a combination of both) from delivering or producing goods, rendering services, or other activities that constitute the entity's ongoing major or central operations.") when those future goods or services are provided. The revenue recognition period would extend beyond the initial contractual period if the entity grants the customer the option to renew the contract and that option provides the customer with a material right as described in paragraph [606-10-55-42](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-42). ##### [606-10-55-52](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-52) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:f6ea3008fe52ef6a2e13144ba311d903661e2bf7fa465c4e9994dafe4c76f06e Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If the nonrefundable upfront fee relates to a good or service, the entity should evaluate whether to account for the good or service as a separate performance obligation in accordance with paragraphs [606-10-25-14 through 25-22](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-14) . ##### [606-10-55-53](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-53) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:8c37b43b43017eb2b7d49f3b208fe49b4425710e88eeb1520348b513694be129 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An entity may charge a nonrefundable fee in part as compensation for costs incurred in setting up a contract (or other administrative tasks as described in paragraph [606-10-25-17](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-17)). If those setup activities do not satisfy a performance obligation, the entity should disregard those activities (and related costs) when measuring progress in accordance with paragraph [606-10-55-21](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-21). That is because the costs of setup activities do not depict the transfer of services to the customer. The entity should assess whether costs incurred in setting up a contract have resulted in an asset that should be recognized in accordance with paragraph [340-40-25-5](https://asc.understandingaccounting.org/asc/340/40/#340-40-25-5). ##### [606-10-55-54](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-54) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:e5dee3b25990a851cd140355c5b832288ea0fec95937339d123108bbd1c941a8 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. A license establishes a customer's rights to the intellectual property of an entity. Licenses of intellectual property may include, but are not limited to, licenses of any of the following: 1. a Software (other than software subject to a hosting arrangement that does not meet the criteria in paragraph [985-20-15-5](https://asc.understandingaccounting.org/asc/985/20/#985-20-15-5)) and technology 2. b Motion pictures, music, and other forms of media and entertainment 3. c Franchises 4. d Patents, trademarks, and copyrights. ##### [606-10-55-55](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-55) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:9b786a755f1b0a79d1b417fc07b578f564975524dde3e2663586dac9bad460ca Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. In addition to a promise to grant a license (or licenses) to a [customer](https://asc.understandingaccounting.org/glossary/c/#customer "A party that has contracted with an entity to obtain goods or services that are an output of the entity's ordinary activities in exchange for consideration."), an entity may also promise to transfer other goods or services to the customer. Those promises may be explicitly stated in the [contract](https://asc.understandingaccounting.org/glossary/c/#contract "An agreement between two or more parties that creates enforceable rights and obligations.") or implied by an entity's customary business practices, published policies, or specific statements (see paragraph [606-10-25-16](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-16)). As with other types of contracts, when a contract with a customer includes a promise to grant a license (or licenses) in addition to other promised goods or services, an entity applies paragraphs [606-10-25-14 through 25-22](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-14) to identify each of the [performance obligations](https://asc.understandingaccounting.org/glossary/p/#performance-obligation "A promise in a contract with a customer to transfer to the customer either: A good or service (or a bundle of goods or services) that is distinct A series of distinct goods or services that are substantially the same and that have the same pattern of transfer to the customer.") in the contract. ##### [606-10-55-56](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-56) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:37ab0077010844931916ea7ab016914607f34bc86d56a6d9347a134f210247d0 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If the promise to grant a license is not distinct from other promised goods or services in the contract in accordance with paragraphs [606-10-25-18 through 25-22](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-18) , an entity should account for the promise to grant a license and those other promised goods or services together as a single performance obligation. Examples of licenses that are not distinct from other goods or services promised in the contract include the following: 1. a A license that forms a component of a tangible good and that is integral to the functionality of the good 2. b A license that the customer can benefit from only in conjunction with a related service (such as an online service provided by the entity that enables, by granting a license, the customer to access content). ##### [606-10-55-57](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-57) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:930f397660d6d5abb8ec1e043d74a9f3bcb0e8f5e962e854da9291ae962df9ea Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. When a single performance obligation includes a license (or licenses) of intellectual property and one or more other goods or services, the entity considers the nature of the combined good or service for which the customer has contracted (including whether the license that is part of the single performance obligation provides the customer with a right to use or a right to access intellectual property in accordance with paragraphs [606-10-55-59 through 55-60](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-59) and [606-10-55-62 through 55-64A](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-62)) in determining whether that combined good or service is satisfied over time or at a point in time in accordance with paragraphs [606-10-25-23 through 25-30](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-23) and, if over time, in selecting an appropriate method for measuring progress in accordance with paragraphs [606-10-25-31 through 25-37](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-31) . ##### [606-10-55-58](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-58) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:e82343952fecccda954366157b2b2ffe2d4dd3a85415c8ba5caaec453fe5ac83 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. In evaluating whether a license transfers to a customer at a point in time or over time, an entity should consider whether the nature of the entity's promise in granting the license to a customer is to provide the customer with either: 1. a A right to access the entity's intellectual property throughout the license period (or its remaining economic life, if shorter) 2. b A right to use the entity's intellectual property as it exists at the point in time at which the license is granted. ##### [606-10-55-58A](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-58A) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:3e254dd42fcb278344978b41d27cecea7dfbd573642ba52a31dffcf3b3479c14 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An entity should account for a promise to provide a customer with a right to access the entity's intellectual property as a performance obligation satisfied over time because the customer will simultaneously receive and consume the benefit from the entity's performance of providing access to its intellectual property as the performance occurs (see paragraph [606-10-25-27(a)](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-27)). An entity should apply paragraphs [606-10-25-31 through 25-37](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-31) to select an appropriate method to measure its progress toward complete satisfaction of that performance obligation to provide access to its intellectual property. ##### [606-10-55-58B](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-58B) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:ea8e19e9f941a3820b3fa514ec6cce669ced913bd696beaa738ed1c185990629 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An entity's promise to provide a customer with the right to use its intellectual property is satisfied at a point in time. The entity should apply paragraph [606-10-25-30](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-30) to determine the point in time at which the license transfers to the customer. ##### [606-10-55-58C](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-58C) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:443c3cdbabb414a842941672ddef6412f1f3ec3f331c82e1b7fa5ac38f9d4c03 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Notwithstanding paragraphs [606-10-55-58A through 55-58B](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-58A) , revenue cannot be recognized from a license of intellectual property before both: 1. a An entity provides (or otherwise makes available) a copy of the intellectual property to the customer. 2. b The beginning of the period during which the customer is able to use and benefit from its right to access or its right to use the intellectual property. That is, an entity would not recognize revenue before the beginning of the license period even if the entity provides (or otherwise makes available) a copy of the intellectual property before the start of the license period or the customer has a copy of the intellectual property from another transaction. For example, an entity would recognize revenue from a license renewal no earlier than the beginning of the renewal period. ##### [606-10-55-59](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-59) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:dd5b089999e9463d68b8daa2f64e8cb4edd585df3bbd1fb4a2113d63d69cdd5e Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. To determine whether the entity's promise to provide a right to access its intellectual property or a right to use its intellectual property, the entity should consider the nature of the intellectual property to which the customer will have rights. Intellectual property is either: 1. a Functional intellectual property. Intellectual property that has significant standalone functionality (for example, the ability to process a transaction, perform a function or task, or be played or aired). Functional intellectual property derives a substantial portion of its utility (that is, its ability to provide benefit or value) from its significant standalone functionality. 2. b Symbolic intellectual property. Intellectual property that is not functional intellectual property (that is, intellectual property that does not have significant standalone functionality). Because symbolic intellectual property does not have significant standalone functionality, substantially all of the utility of symbolic intellectual property is derived from its association with the entity's past or ongoing activities, including its ordinary business activities. ##### [606-10-55-60](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-60) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:7a7951ae9fd821296bf6b9d1a4fb034a0e30a5f31a09aa5e4c8b905c258af019 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. A customer's ability to derive benefit from a license to symbolic intellectual property depends on the entity continuing to support or maintain the intellectual property. Therefore, a license to symbolic intellectual property grants the customer a right to access the entity's intellectual property, which is satisfied over time (see paragraphs [606-10-55-58A](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-58A) and [606-10-55-58C](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-58C)) as the entity fulfills its promise to both: 1. a Grant the customer rights to use and benefit from the entity's intellectual property 2. b Support or maintain the intellectual property. An entity generally supports or maintains symbolic intellectual property by continuing to undertake those activities from which the utility of the intellectual property is derived and/or refraining from activities or other actions that would significantly degrade the utility of the intellectual property. 3. c [Subparagraph superseded by Accounting Standards Update No. 2016-10](https://asc.understandingaccounting.org/updates/asu-2016-10/). ##### [606-10-55-61](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-61) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:75fb847c0ecc7280c3031045b4e3238d52ffa978bf631d98ec1827dde846a50c Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. [Paragraph superseded by Accounting Standards Update No. 2016-10](https://asc.understandingaccounting.org/updates/asu-2016-10/). ##### [606-10-55-62](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-62) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:01469f6b1a88a0f1192097be763b202f33304c9d4cef5eedad0d9c7ec2c222f4 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. A license to functional intellectual property grants a right to use the entity's intellectual property as it exists at the point in time at which the license is granted unless both of the following criteria are met: 1. a The functionality of the intellectual property to which the customer has rights is expected to substantively change during the license period as a result of activities of the entity that do not transfer a promised good or service to the customer (see paragraphs [606-10-25-16 through 25-18](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-16) ). Additional promised goods or services (for example, intellectual property upgrade rights or rights to use or access additional intellectual property) are not considered in assessing this criterion. 2. b The customer is contractually or practically required to use the updated intellectual property resulting from the activities in criterion (a). If both of those criteria are met, then the license grants a right to access the entity's intellectual property. ##### [606-10-55-63](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-63) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:fb243a02ec007ce88afb7020573fa85c40226f6280d7b8e2a3cb1a6a40ff24ef Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Because functional intellectual property has significant standalone functionality, an entity's activities that do not substantively change that functionality do not significantly affect the utility of the intellectual property to which the customer has rights. Therefore, the entity's promise to the customer in granting a license to functional intellectual property does not include supporting or maintaining the intellectual property. Consequently, if a license to functional intellectual property is a separate [performance obligation](https://asc.understandingaccounting.org/glossary/p/#performance-obligation "A promise in a contract with a customer to transfer to the customer either: A good or service (or a bundle of goods or services) that is distinct A series of distinct goods or services that are substantially the same and that have the same pattern of transfer to the customer.") (see paragraph [606-10-55-55](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-55)) and does not meet the criteria in paragraph [606-10-55-62](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-62), it is satisfied at a point in time (see paragraphs [606-10-55-58B through 55-58C](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-58B) ). ##### [606-10-55-63A](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-63A) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:fa1a516d4f690ef1db7dea8a59044d80c0ffbe253be676e4dc7e82b13f8cf34f Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The following flowchart depicts the decision process for evaluating whether the nature of an entity's promise in granting a license is to provide the customer with a right to access the entity's intellectual property or a right to use the entity's intellectual property. The flowchart does not include all of the guidance on determining the nature of an entity's promise in granting a license of intellectual property in this Subtopic and is not intended as a substitute for the guidance in this Subtopic. - ![](https://asc.understandingaccounting.org/asc-img/GUID-9843CC6A-3677-4D9A-9916-06E511EDCF51-low.gif) The intellectual property to which the customer has rights is symbolic. The nature of the entity's promise is to provide the customer with a right to access the entity's intellectual property. (paragraph 606-10-55-60) The nature of the entity's promise is to provide the customer with a right to use the entity's intellectual property. (paragraph 606-10-55-62) The nature of the entity's promise is to provide the customer with a right to access the entity's intellectual property. (paragraph 606-10-55-62) The nature of the entity's promise is to provide the customer with a right to use the entity's intellectual property. (paragraph 606-10-55-62) Is the customer contractually or practically required to use the updated intellectual property? (paragraph 606-10-55-62b) Is the functionality of the intellectual property expected to substantively change during the license period as a result of activities of the entity that do not transfer a good or service to the customer? (paragraph 606-10-55-62a) Does the intellectual property to which the customer has rights have significant standalone functionality? (paragraph 606-10-55-59) The intellectual property to which the customer has rights is functional. ##### [606-10-55-64](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-64) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:2b7f202105b37b3872897f8f5d9baabf602f3e8d26228cb59533ab8bbd1495a0 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Contractual provisions that explicitly or implicitly require an entity to transfer control of additional goods or services to a customer (for example, by requiring the entity to transfer control of additional rights to use or rights to access intellectual property that the customer does not already control) should be distinguished from contractual provisions that explicitly or implicitly define the attributes of a single promised license (for example, restrictions of time, geographical region, or use). Attributes of a promised license define the scope of a customer's right to use or right to access the entity's intellectual property and, therefore, do not define whether the entity satisfies its [performance obligation](https://asc.understandingaccounting.org/glossary/p/#performance-obligation "A promise in a contract with a customer to transfer to the customer either: A good or service (or a bundle of goods or services) that is distinct A series of distinct goods or services that are substantially the same and that have the same pattern of transfer to the customer.") at a point in time or over time and do not create an obligation for the entity to transfer any additional rights to use or access its intellectual property. 1. a [Subparagraph superseded by Accounting Standards Update No. 2016-10](https://asc.understandingaccounting.org/updates/asu-2016-10/). 2. b [Subparagraph superseded by Accounting Standards Update No. 2016-10](https://asc.understandingaccounting.org/updates/asu-2016-10/). ##### [606-10-55-64A](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-64A) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:aafaa754f54780c8bc073bd7fc3e06638c87f40bfd3ff7b7e0d8058f6110f9a1 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Guarantees provided by the entity that it has a valid patent to intellectual property and that it will defend that patent from unauthorized use do not affect whether a license provides a right to access the entity's intellectual property or a right to use the entity's intellectual property. Similarly, a promise to defend a patent right is not a promised good or service because it provides assurance to the customer that the license transferred meets the specifications of the license promised in the contract. ##### [606-10-55-65](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-65) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:c31881d9b2d941eac27ea9c230ca202b974407a13df719a90fa804cf10c1a899 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Notwithstanding the guidance in paragraphs [606-10-32-11 through 32-14](https://asc.understandingaccounting.org/asc/606/10/#606-10-32-11) , an entity should recognize [revenue](https://asc.understandingaccounting.org/glossary/r/#revenue "Inflows or other enhancements of assets of an entity or settlements of its liabilities (or a combination of both) from delivering or producing goods, rendering services, or other activities that constitute the entity's ongoing major or central operations.") for a sales-based or usage-based royalty promised in exchange for a license of intellectual property only when (or as) the later of the following events occurs: 1. a The subsequent sale or usage occurs. 2. b The [performance obligation](https://asc.understandingaccounting.org/glossary/p/#performance-obligation "A promise in a contract with a customer to transfer to the customer either: A good or service (or a bundle of goods or services) that is distinct A series of distinct goods or services that are substantially the same and that have the same pattern of transfer to the customer.") to which some or all of the sales-based or usage-based royalty has been allocated has been satisfied (or partially satisfied). ##### [606-10-55-65A](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-65A) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:45b495303f292e3200c5e516d6b6be31d06d9a1eacadc50c9049ae02dada7e67 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The guidance for a sales-based or usage-based royalty in paragraph [606-10-55-65](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-65) applies when the royalty relates only to a license of intellectual property or when a license of intellectual property is the predominant item to which the royalty relates (for example, the license of intellectual property may be the predominant item to which the royalty relates when the entity has a reasonable expectation that the customer would ascribe significantly more value to the license than to the other goods or services to which the royalty relates). ##### [606-10-55-65B](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-65B) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:a1c4233cca74c4c8722dee31161f2930e559928b8650dc05232dc8321678eec7 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. When the guidance in paragraph [606-10-55-65A](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-65A) is met, revenue from a sales-based or usage-based royalty should be recognized wholly in accordance with the guidance in paragraph [606-10-55-65](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-65). When the guidance in paragraph [606-10-55-65A](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-65A) is not met, the guidance on variable consideration in paragraphs [606-10-32-5 through 32-14](https://asc.understandingaccounting.org/asc/606/10/#606-10-32-5) applies to the sales-based or usage-based royalty. ##### [606-10-55-66](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-66) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:b92d2d7e641c731fa0c7b376792eae6a32dfe7f1f38acfa9e2a94df9baf50cf7 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. A repurchase agreement is a [contract](https://asc.understandingaccounting.org/glossary/c/#contract "An agreement between two or more parties that creates enforceable rights and obligations.") in which an entity sells an asset and also promises or has the option (either in the same contract or in another contract) to repurchase the asset. The repurchased asset may be the asset that was originally sold to the [customer](https://asc.understandingaccounting.org/glossary/c/#customer "A party that has contracted with an entity to obtain goods or services that are an output of the entity's ordinary activities in exchange for consideration."), an asset that is substantially the same as that asset, or another asset of which the asset that was originally sold is a component. ##### [606-10-55-67](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-67) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:8f5d78f4129ecb86a4a11b282a4d45a4394f918db3386d8a807e7ae0675d00b6 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Repurchase agreements generally come in three forms: 1. a An entity's obligation to repurchase the asset (a forward) 2. b An entity's right to repurchase the asset (a call option) 3. c An entity's obligation to repurchase the asset at the customer's request (a put option). ##### [606-10-55-68](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-68) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:a9e86675e7529df1e57897879c5ca42f8cacfd9b1712f9873d394a30d6243955 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If an entity has an obligation or a right to repurchase the asset (a forward or a call option), a [customer](https://asc.understandingaccounting.org/glossary/c/#customer "A party that has contracted with an entity to obtain goods or services that are an output of the entity's ordinary activities in exchange for consideration.") does not obtain control of the asset because the customer is limited in its ability to direct the use of, and obtain substantially all of the remaining benefits from, the asset even though the customer may have physical possession of the asset. Consequently, the entity should account for the [contract](https://asc.understandingaccounting.org/glossary/c/#contract "An agreement between two or more parties that creates enforceable rights and obligations.") as either of the following: 1. a A [lease](https://asc.understandingaccounting.org/glossary/l/#lease "A contract, or part of a contract, that conveys the right to control the use of identified property, plant, or equipment (an identified asset) for a period of time in exchange for consideration.") in accordance with Topic 842 on leases, if the entity can or must repurchase the asset for an amount that is less than the original selling price of the asset unless the contract is part of a sale and leaseback transaction. If the contract is part of a sale and leaseback transaction, the entity should account for the contract as a financing arrangement and not as a sale and leaseback transaction in accordance with Subtopic 842-40. 2. b A financing arrangement in accordance with paragraph [606-10-55-70](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-70), if the entity can or must repurchase the asset for an amount that is equal to or more than the original selling price of the asset. ##### [606-10-55-69](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-69) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:430ec1171c6e3c6c7199ff9d80dc5299128c33a0a00399a77538d868f58bb821 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. When comparing the repurchase price with the selling price, an entity should consider the time value of money. ##### [606-10-55-70](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-70) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:c5d56396533e65f4118b55dfaa2b4772df0ff875eee08d65e7cdd9449dbca0a5 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If the repurchase agreement is a financing arrangement, the entity should continue to recognize the asset and also recognize a financial liability for any consideration received from the customer. The entity should recognize the difference between the amount of consideration received from the customer and the amount of consideration to be paid to the customer as interest and, if applicable, as processing or holding costs (for example, insurance). ##### [606-10-55-71](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-71) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:acbb416e328e2f3633f8bea76444c58388d3af553a046f7744782fa3754515a1 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If the option lapses unexercised, an entity should derecognize the liability and recognize [revenue](https://asc.understandingaccounting.org/glossary/r/#revenue "Inflows or other enhancements of assets of an entity or settlements of its liabilities (or a combination of both) from delivering or producing goods, rendering services, or other activities that constitute the entity's ongoing major or central operations."). ##### [606-10-55-72](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-72) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:b8f2cd8d7d2d93d6291a6644f0e3d851172066f065d8080da6adaf5f0de8242d Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If an entity has an obligation to repurchase the asset at the [customer's](https://asc.understandingaccounting.org/glossary/c/#customer "A party that has contracted with an entity to obtain goods or services that are an output of the entity's ordinary activities in exchange for consideration.") request (a put option) at a price that is lower than the original selling price of the asset, the entity should consider at contract inception whether the customer has a significant economic incentive to exercise that right. The customer's exercising of that right results in the customer effectively paying the entity consideration for the right to use a specified asset for a period of time. Therefore, if the customer has a significant economic incentive to exercise that right, the entity should account for the agreement as a lease in accordance with Topic 842 on leases unless the contract is part of a sale and leaseback transaction. If the contract is part of a sale and leaseback transaction, the entity should account for the contract as a financing arrangement and not as a sale and leaseback transaction in accordance with Subtopic 842-40. ##### [606-10-55-73](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-73) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:5434ea6272c30cf433bb9632495508c1f8f8be5e2736316150cd3ac16ca43022 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. To determine whether a customer has a significant economic incentive to exercise its right, an entity should consider various factors, including the relationship of the repurchase price to the expected market value of the asset at the date of the repurchase and the amount of time until the right expires. For example, if the repurchase price is expected to significantly exceed the market value of the asset, this may indicate that the customer has a significant economic incentive to exercise the put option. ##### [606-10-55-74](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-74) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:40f16008193a4eb28e4d4a3ec39754176e8b0a7caf510940a927fc610dce4ea4 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If the customer does not have a significant economic incentive to exercise its right at a price that is lower than the original selling price of the asset, the entity should account for the agreement as if it were the sale of a product with a right of return as described in paragraphs [606-10-55-22 through 55-29](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-22) . ##### [606-10-55-75](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-75) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:28ee8d2555cf2355062e3ef02f62849066835a0b60686b4239b2cb34b26e7ce0 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If the repurchase price of the asset is equal to or greater than the original selling price and is more than the expected market value of the asset, the contract is in effect a financing arrangement and, therefore, should be accounted for as described in paragraph [606-10-55-70](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-70). ##### [606-10-55-76](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-76) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:8780e9db9fc12a79e483fe523af9ca0a8532869fe1048bf8d8401800124064db Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If the repurchase price of the asset is equal to or greater than the original selling price and is less than or equal to the expected market value of the asset, and the customer does not have a significant economic incentive to exercise its right, then the entity should account for the agreement as if it were the sale of a product with a right of return as described in paragraphs [606-10-55-22 through 55-29](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-22) . ##### [606-10-55-77](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-77) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:07964da1cc19f1c4dc944142a3b7af45d5fe676df81b55444f9a47fde591531e Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. When comparing the repurchase price with the selling price, an entity should consider the time value of money. ##### [606-10-55-78](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-78) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:9ef65162f5b74e27c0b57a37b8baacff47db14543c0a348a6b28cf3528edf541 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If the option lapses unexercised, an entity should derecognize the liability and recognize [revenue](https://asc.understandingaccounting.org/glossary/r/#revenue "Inflows or other enhancements of assets of an entity or settlements of its liabilities (or a combination of both) from delivering or producing goods, rendering services, or other activities that constitute the entity's ongoing major or central operations."). ##### [606-10-55-79](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-79) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:970d694885c7491237a1b30fe48e5355e80e522d5b673e95393f285b5adbdae1 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. When an entity delivers a product to another party (such as a dealer or a distributor) for sale to end [customers](https://asc.understandingaccounting.org/glossary/c/#customer "A party that has contracted with an entity to obtain goods or services that are an output of the entity's ordinary activities in exchange for consideration."), the entity should evaluate whether that other party has obtained control of the product at that point in time. A product that has been delivered to another party may be held in a consignment arrangement if that other party has not obtained control of the product. Accordingly, an entity should not recognize [revenue](https://asc.understandingaccounting.org/glossary/r/#revenue "Inflows or other enhancements of assets of an entity or settlements of its liabilities (or a combination of both) from delivering or producing goods, rendering services, or other activities that constitute the entity's ongoing major or central operations.") upon delivery of a product to another party if the delivered product is held on consignment. ##### [606-10-55-80](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-80) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:ed3dd9ee589d38e1ea58f12b0e06b9d38295f89261584b7b9072b6a85e8dd705 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Indicators that an arrangement is a consignment arrangement include, but are not limited to, the following: 1. a The product is controlled by the entity until a specified event occurs, such as the sale of the product to a customer of the dealer, or until a specified period expires. 2. b The entity is able to require the return of the product or transfer the product to a third party (such as another dealer). 3. c The dealer does not have an unconditional obligation to pay for the product (although it might be required to pay a deposit). ##### [606-10-55-81](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-81) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:85632bc85b3c93e0cc8e0f9e1c72e33f708bce14ba29e5345f09767ff9d05741 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. A bill-and-hold arrangement is a [contract](https://asc.understandingaccounting.org/glossary/c/#contract "An agreement between two or more parties that creates enforceable rights and obligations.") under which an entity bills a [customer](https://asc.understandingaccounting.org/glossary/c/#customer "A party that has contracted with an entity to obtain goods or services that are an output of the entity's ordinary activities in exchange for consideration.") for a product but the entity retains physical possession of the product until it is transferred to the customer at a point in time in the future. For example, a customer may request an entity to enter into such a contract because of the customer's lack of available space for the product or because of delays in the customer's production schedules. ##### [606-10-55-82](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-82) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:43d54ec8362512248fa0fd3517dbb0c5daa214177a407e8ffe3cdcc7578b9709 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An entity should determine when it has satisfied its performance obligation to transfer a product by evaluating when a customer obtains control of that product (see paragraph [606-10-25-30](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-30)). For some contracts, control is transferred either when the product is delivered to the customer's site or when the product is shipped, depending on the terms of the contract (including delivery and shipping terms). However, for some contracts, a customer may obtain control of a product even though that product remains in an entity's physical possession. In that case, the customer has the ability to direct the use of, and obtain substantially all of the remaining benefits from, the product even though it has decided not to exercise its right to take physical possession of that product. Consequently, the entity does not control the product. Instead, the entity provides custodial services to the customer over the customer's asset. ##### [606-10-55-83](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-83) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:55fd8c305a74be82c885f1ebf6e350606107f5a0666d7300d7eb229ecfe96685 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. In addition to applying the guidance in paragraph [606-10-25-30](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-30), for a customer to have obtained control of a product in a bill-and-hold arrangement, all of the following criteria must be met: 1. a The reason for the bill-and-hold arrangement must be substantive (for example, the customer has requested the arrangement). 2. b The product must be identified separately as belonging to the customer. 3. c The product currently must be ready for physical transfer to the customer. 4. d The entity cannot have the ability to use the product or to direct it to another customer. ##### [606-10-55-84](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-84) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:61d58d07ad43301e14e40eb232bee03544c9ace900bb91407a217ceab6d5bcca Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If an entity recognizes [revenue](https://asc.understandingaccounting.org/glossary/r/#revenue "Inflows or other enhancements of assets of an entity or settlements of its liabilities (or a combination of both) from delivering or producing goods, rendering services, or other activities that constitute the entity's ongoing major or central operations.") for the sale of a product on a bill-and-hold basis, the entity should consider whether it has remaining performance obligations (for example, for custodial services) in accordance with paragraphs [606-10-25-14 through 25-22](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-14) to which the entity should allocate a portion of the [transaction price](https://asc.understandingaccounting.org/glossary/t/#transaction-price "The amount of consideration to which an entity expects to be entitled in exchange for transferring promised goods or services to a customer, excluding amounts collected on behalf of third parties.") in accordance with paragraphs [606-10-32-28 through 32-41](https://asc.understandingaccounting.org/asc/606/10/#606-10-32-28) . ##### [606-10-55-85](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-85) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:2e37867a911532c08ceb80dd83dc12761a00f1735525b3ad5c04484b3d951e49 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. In accordance with paragraph [606-10-25-30(e)](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-30), a [customer's](https://asc.understandingaccounting.org/glossary/c/#customer "A party that has contracted with an entity to obtain goods or services that are an output of the entity's ordinary activities in exchange for consideration.") acceptance of an asset may indicate that the customer has obtained control of the asset. Customer acceptance clauses allow a customer to cancel a [contract](https://asc.understandingaccounting.org/glossary/c/#contract "An agreement between two or more parties that creates enforceable rights and obligations.") or require an entity to take remedial action if a good or service does not meet agreed-upon specifications. An entity should consider such clauses when evaluating when a customer obtains control of a good or service. ##### [606-10-55-86](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-86) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:729dd04dffcfa0236e90b0724f56a2fa87a388b723f3bdf54b1a41e71f3f4937 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If an entity can objectively determine that control of a good or service has been transferred to the customer in accordance with the agreed-upon specifications in the contract, then customer acceptance is a formality that would not affect the entity's determination of when the customer has obtained control of the good or service. For example, if the customer acceptance clause is based on meeting specified size and weight characteristics, an entity would be able to determine whether those criteria have been met before receiving confirmation of the customer's acceptance. The entity's experience with contracts for similar goods or services may provide evidence that a good or service provided to the customer is in accordance with the agreed-upon specifications in the contract. If [revenue](https://asc.understandingaccounting.org/glossary/r/#revenue "Inflows or other enhancements of assets of an entity or settlements of its liabilities (or a combination of both) from delivering or producing goods, rendering services, or other activities that constitute the entity's ongoing major or central operations.") is recognized before customer acceptance, the entity still must consider whether there are any remaining [performance obligations](https://asc.understandingaccounting.org/glossary/p/#performance-obligation "A promise in a contract with a customer to transfer to the customer either: A good or service (or a bundle of goods or services) that is distinct A series of distinct goods or services that are substantially the same and that have the same pattern of transfer to the customer.") (for example, installation of equipment) and evaluate whether to account for them separately. ##### [606-10-55-87](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-87) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:e873349a8c0c9d227654e9fcb91031df55d03a3a141167b1c3cf8c5053784cac Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. However, if an entity cannot objectively determine that the good or service provided to the customer is in accordance with the agreed-upon specifications in the contract, then the entity would not be able to conclude that the customer has obtained control until the entity receives the customer's acceptance. That is because, in that circumstance the entity cannot determine that the customer has the ability to direct the use of, and obtain substantially all of the remaining benefits from, the good or service. ##### [606-10-55-88](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-88) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:d992ccfc56cf9db0d53b7de3112837cbabe463d1bb99d0dd5f6dfd6ee1017f20 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If an entity delivers products to a customer for trial or evaluation purposes and the customer is not committed to pay any consideration until the trial period lapses, control of the product is not transferred to the customer until either the customer accepts the product or the trial period lapses. ##### [606-10-55-88A](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-88A) Pending content: yes Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:fec14ca382aa325e827ebf5257fa75322f8c6cb45dbd2b7962f00f64885db021 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Paragraph [606-10-32-25A](https://asc.understandingaccounting.org/asc/606/10/#606-10-32-25A) requires that equity instruments granted in conjunction with an entity selling goods or services be measured and classified under Topic 718 on stock compensation. If the number of equity instruments promised in a contract is variable due to a [service condition](https://asc.understandingaccounting.org/glossary/s/#service-condition "A condition affecting the vesting, exercisability, exercise price, or other pertinent factors used in determining the fair value of an award that depends solely on an employee rendering service to the employer for the requisite service period or a nonemployee delivering goods or rendering services to the grantor over a vesting period. A condition that results in the acceleration of vesting in the event of a grantee's death, disability, or termination without cause is a service condition.") or a [performance condition](https://asc.understandingaccounting.org/glossary/p/#performance-condition "A condition affecting the vesting, exercisability, exercise price, or other pertinent factors used in determining the fair value of an award that relates to both of the following: Rendering service or delivering goods for a specified (either explicitly or implicitly) period of time Achieving a specified performance target that is defined solely by reference to the grantor's own operations (or activities) or by reference to the grantee's performance related to the grantor's own operations (or activities).Attaining a specified growth rate in return on assets, obtaining regulatory approval to market a specified product, selling shares in an initial public offering or other financing event, and a change in control are examples of performance conditions. A performance target also may be defined by reference to the same performance measure of another entity or group of entities. For example, attaining a growth rate in earnings per share (EPS) that exceeds the average growth rate in EPS of other entities in the same industry is a performance condition. A performance target might pertain to the performance of the entity as a whole or to some part of the entity, such as a division, or to the performance of the grantee if such performance is in accordance with the terms of the award and solely relates to the grantor's own operations (or activities).(P) December 16, 2026; (N) December 16, 2026606-10-65-2For share-based payments in which a grantor acquires goods or services to be used or consumed in the grantor’s own operations, a condition affecting the vesting, exercisability, exercise price, or other pertinent factors used in determining the fair value of an award that relates to both of the following: Rendering service or delivering goods for a specified (either explicitly or implicitly) period of time Achieving a specified performance target that is defined solely by reference to the grantor's own operations (or activities) or by reference to the grantee's performance related to the grantor's own operations (or activities).Attaining a specified growth rate in return on assets, obtaining regulatory approval to market a specified product, selling shares in an initial public offering or other financing event, and a change in control are examples of performance conditions. A performance target also may be defined by reference to the same performance measure of another entity or group of entities. For example, attaining a growth rate in earnings per share (EPS) that exceeds the average growth rate in EPS of other entities in the same industry is a performance condition. A performance target might pertain to the performance of the entity as a whole or to some part of the entity, such as a division, or to the performance of the grantee if such performance is in accordance with the terms of the award and solely relates to the grantor's own operations (or activities).For share-based consideration payable to a customer that can result in a reduction of the transaction price in accordance with Topic 606, a condition affecting the vesting, exercisability, exercise price, or other pertinent factors used in determining the fair value of an award that relates to any of the following:Achieving a specified performance target that is defined solely by reference to the grantor’s own operations (or activities) or by reference to the grantee’s (the customer’s) performance related to the grantor’s own operations (or activities)The grantee’s purchase (or potential purchase) of the grantor’s goods or services from either the grantor or the grantor’s customersA purchase (or potential purchase) of the grantor’s goods or services from either the grantee or the grantee’s customers.The performance targets listed in this definition for employee and nonemployee awards (for example, a change in control) are also examples of performance conditions for share-based consideration payable to a customer.") that affects the vesting of an [award](https://asc.understandingaccounting.org/glossary/a/#award "The collective noun for multiple instruments with the same terms and conditions granted at the same time either to a single grantee or to a group of grantees. An award may specify multiple vesting dates, referred to as graded vesting, and different parts of an award may have different expected terms. References to an award also apply to a portion of an award."), an entity should estimate the number of equity instruments that it will be obligated to issue to its customer and update the estimate of the number of equity instruments until the award ultimately vests in accordance with Topic 718. When measuring each instrument, the entity should include, in accordance with Topic 718, the effect of any market conditions and service or performance conditions that affect factors other than vesting. Examples of factors other than vesting are included in paragraph [718-10-30-15](https://asc.understandingaccounting.org/asc/718/10/#718-10-30-15). Changes in the grant-date fair value of an award due to revisions in the expected outcome of a service condition or a performance condition (both those that affect vesting and those that affect factors other than vesting) are not deemed to be changes due to the form of the consideration (as described in paragraph [606-10-32-23](https://asc.understandingaccounting.org/asc/606/10/#606-10-32-23)) and, therefore, should be reflected in the transaction price. Transition date:(P) December 16, 2026; (N) December 16, 2026Transition guidance: [606-10-65-2](https://asc.understandingaccounting.org/asc/606/10/#606-10-65-2)
Editor's Note: The content of paragraph 606-10-55-88A will change upon transition, together with a change in the heading noted below.
• > Share-Based Consideration Payable to a Customer
Paragraph [606-10-32-25A](https://asc.understandingaccounting.org/asc/606/10/#606-10-32-25A) requires that share-based consideration granted in conjunction with an entity selling goods or services be measured and classified under Topic 718 on stock compensation. If the number of [awards](https://asc.understandingaccounting.org/glossary/a/#award "The collective noun for multiple instruments with the same terms and conditions granted at the same time either to a single grantee or to a group of grantees. An award may specify multiple vesting dates, referred to as graded vesting, and different parts of an award may have different expected terms. References to an award also apply to a portion of an award.")promised in a contract is variable due to a [service condition](https://asc.understandingaccounting.org/glossary/s/#service-condition "A condition affecting the vesting, exercisability, exercise price, or other pertinent factors used in determining the fair value of an award that depends solely on an employee rendering service to the employer for the requisite service period or a nonemployee delivering goods or rendering services to the grantor over a vesting period. A condition that results in the acceleration of vesting in the event of a grantee's death, disability, or termination without cause is a service condition.") or a [performance condition](https://asc.understandingaccounting.org/glossary/p/#performance-condition "A condition affecting the vesting, exercisability, exercise price, or other pertinent factors used in determining the fair value of an award that relates to both of the following: Rendering service or delivering goods for a specified (either explicitly or implicitly) period of time Achieving a specified performance target that is defined solely by reference to the grantor's own operations (or activities) or by reference to the grantee's performance related to the grantor's own operations (or activities).Attaining a specified growth rate in return on assets, obtaining regulatory approval to market a specified product, selling shares in an initial public offering or other financing event, and a change in control are examples of performance conditions. A performance target also may be defined by reference to the same performance measure of another entity or group of entities. For example, attaining a growth rate in earnings per share (EPS) that exceeds the average growth rate in EPS of other entities in the same industry is a performance condition. A performance target might pertain to the performance of the entity as a whole or to some part of the entity, such as a division, or to the performance of the grantee if such performance is in accordance with the terms of the award and solely relates to the grantor's own operations (or activities).(P) December 16, 2026; (N) December 16, 2026606-10-65-2For share-based payments in which a grantor acquires goods or services to be used or consumed in the grantor’s own operations, a condition affecting the vesting, exercisability, exercise price, or other pertinent factors used in determining the fair value of an award that relates to both of the following: Rendering service or delivering goods for a specified (either explicitly or implicitly) period of time Achieving a specified performance target that is defined solely by reference to the grantor's own operations (or activities) or by reference to the grantee's performance related to the grantor's own operations (or activities).Attaining a specified growth rate in return on assets, obtaining regulatory approval to market a specified product, selling shares in an initial public offering or other financing event, and a change in control are examples of performance conditions. A performance target also may be defined by reference to the same performance measure of another entity or group of entities. For example, attaining a growth rate in earnings per share (EPS) that exceeds the average growth rate in EPS of other entities in the same industry is a performance condition. A performance target might pertain to the performance of the entity as a whole or to some part of the entity, such as a division, or to the performance of the grantee if such performance is in accordance with the terms of the award and solely relates to the grantor's own operations (or activities).For share-based consideration payable to a customer that can result in a reduction of the transaction price in accordance with Topic 606, a condition affecting the vesting, exercisability, exercise price, or other pertinent factors used in determining the fair value of an award that relates to any of the following:Achieving a specified performance target that is defined solely by reference to the grantor’s own operations (or activities) or by reference to the grantee’s (the customer’s) performance related to the grantor’s own operations (or activities)The grantee’s purchase (or potential purchase) of the grantor’s goods or services from either the grantor or the grantor’s customersA purchase (or potential purchase) of the grantor’s goods or services from either the grantee or the grantee’s customers.The performance targets listed in this definition for employee and nonemployee awards (for example, a change in control) are also examples of performance conditions for share-based consideration payable to a customer.") that affects vesting, the grantor should estimate the number of awards that it will be obligated to issue to the grantee and reduce the transaction price by the grant-date fair value of the number of awards that are expected to vest (for awards with service conditions in accordance with paragraph [718-10-35-1D(a)](https://asc.understandingaccounting.org/asc/718/10/#718-10-35-1D)) or for which vesting is probable (for awards with performance conditions in accordance with paragraph [718-10-25-20](https://asc.understandingaccounting.org/asc/718/10/#718-10-25-20)). A grantor should update the estimate of the number of awards until the awards ultimately vest or are forfeited in accordance with Topic 718. When measuring each award, the grantor should include, in accordance with Topic 718, the effect of any market conditions and service or performance conditions that affect factors other than vesting. Examples of factors other than vesting are included in paragraph [718-10-30-15](https://asc.understandingaccounting.org/asc/718/10/#718-10-30-15). Changes in the expected outcome of a service condition or a performance condition (both those that affect vesting and those that affect factors other than vesting) are not deemed to be changes due to the form of the consideration (as described in paragraph [606-10-32-23](https://asc.understandingaccounting.org/asc/606/10/#606-10-32-23)) and, therefore, should be reflected in the transaction price. ##### [606-10-55-88AA](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-88AA) Pending content: yes Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:c680a6958976c1eb6eee8b615d04fccf7e7945387174d28e79e25d498b228a70 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Transition date:(P) December 16, 2026; (N) December 16, 2026Transition guidance: [606-10-65-2](https://asc.understandingaccounting.org/asc/606/10/#606-10-65-2)Examples of performance conditions in share-based consideration payable to a customer that can result in a reduction of the transaction price in accordance with this Topic include those with performance targets based on the grantee (or other parties that purchase the grantor’s goods or services from the grantee) purchasing (or potentially purchasing) any of the following from the grantor (or the grantor’s customers): 1. a A specified volume of goods or services (including over a specified period of time). This includes performance targets achieved upon the first purchase from the grantor (or the grantor’s customers). 2. b A specified monetary amount of goods or services (including over a specified period of time). ##### [606-10-55-88AB](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-88AB) Pending content: yes Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:46f5462ea24d60156f2bbfea55391836320633af53628add4b7d2b62aeb38f6f Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Transition date:(P) December 16, 2026; (N) December 16, 2026Transition guidance: [606-10-65-2](https://asc.understandingaccounting.org/asc/606/10/#606-10-65-2)If share-based consideration payable to a customer is a payment for a distinct good or service from the customer and the grantor accounts for any portion of the share-based consideration as a reduction of the transaction price in accordance with paragraph [606-10-32-26](https://asc.understandingaccounting.org/asc/606/10/#606-10-32-26), the grantor should apply the definition of performance condition that is specific to share-based consideration payable to a customer that can result in a reduction of the transaction price in accordance with this Topic to the entire award (including the portion that is not accounted for as a reduction of the transaction price). ##### [606-10-55-88AC](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-88AC) Pending content: yes Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:96c5ad76f655ae0e36a6c313e34eb1feab9431aa9e0f99541ad881e5ccfe919d Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Transition date:(P) December 16, 2026; (N) December 16, 2026Transition guidance: [606-10-65-2](https://asc.understandingaccounting.org/asc/606/10/#606-10-65-2)A grantor should not apply by analogy the aspects of the definition of performance condition that are specific to share-based consideration payable to a customer that can result in a reduction of the transaction price in accordance with this Topic to awards that are solely within the scope of Topic 718. ##### [606-10-55-88B](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-88B) Pending content: yes Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:026c5207742acb529565dcac0724159eecb733b6ee9e36078af540223bc31c01 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Paragraph [606-10-32-25A](https://asc.understandingaccounting.org/asc/606/10/#606-10-32-25A) requires that equity instruments granted by an entity in conjunction with selling goods or services be measured and classified under Topic 718 at the [grant date](https://asc.understandingaccounting.org/glossary/g/#grant-date "The date at which a grantor and a grantee reach a mutual understanding of the key terms and conditions of a share-based payment award. The grantor becomes contingently obligated on the grant date to issue equity instruments or transfer assets to a grantee who delivers goods or renders services or purchases goods or services as a customer. Awards made under an arrangement that is subject to shareholder approval are not deemed to be granted until that approval is obtained unless approval is essentially a formality (or perfunctory), for example, if management and the members of the board of directors control enough votes to approve the arrangement. Similarly, individual awards that are subject to approval by the board of directors, management, or both are not deemed to be granted until all such approvals are obtained. The grant date for an award of equity instruments is the date that a grantee begins to benefit from, or be adversely affected by, subsequent changes in the price of the grantor's equity shares. Paragraph 718-10-25-5 provides guidance on determining the grant date. See Service Inception Date.") of the instrument. When an estimate of the fair value of an equity instrument is required before the grant date in accordance with the guidance on variable consideration in paragraph [606-10-32-7](https://asc.understandingaccounting.org/asc/606/10/#606-10-32-7), the estimate should be based on the fair value of the award at the reporting dates that occur before the grant date. An entity should change the transaction price for the cumulative effect of measuring the fair value at each reporting period after the initial estimate until the grant date occurs. In the period in which the grant date occurs, the entity should change the transaction price for the cumulative effect of measuring the fair value at the grant date rather than the fair value previously used at any prior reporting date. Transition date:(P) December 16, 2026; (N) December 16, 2026Transition guidance: [606-10-65-2](https://asc.understandingaccounting.org/asc/606/10/#606-10-65-2)Paragraph [606-10-32-25A](https://asc.understandingaccounting.org/asc/606/10/#606-10-32-25A) requires that share-based consideration granted by an entity in conjunction with selling goods or services be measured and classified under Topic 718 at the [grant date](https://asc.understandingaccounting.org/glossary/g/#grant-date "The date at which a grantor and a grantee reach a mutual understanding of the key terms and conditions of a share-based payment award. The grantor becomes contingently obligated on the grant date to issue equity instruments or transfer assets to a grantee who delivers goods or renders services or purchases goods or services as a customer. Awards made under an arrangement that is subject to shareholder approval are not deemed to be granted until that approval is obtained unless approval is essentially a formality (or perfunctory), for example, if management and the members of the board of directors control enough votes to approve the arrangement. Similarly, individual awards that are subject to approval by the board of directors, management, or both are not deemed to be granted until all such approvals are obtained. The grant date for an award of equity instruments is the date that a grantee begins to benefit from, or be adversely affected by, subsequent changes in the price of the grantor's equity shares. Paragraph 718-10-25-5 provides guidance on determining the grant date. See Service Inception Date.") of the instrument. When an estimate of the fair value of share-based consideration is required before the grant date in accordance with the guidance on variable consideration in paragraph [606-10-32-7](https://asc.understandingaccounting.org/asc/606/10/#606-10-32-7), the estimate should be based on the fair value (measured in accordance with Topic 718) of the award at the reporting dates that occur before the grant date. The grantor should change the transaction price for the cumulative effect of measuring the fair value at each reporting period after the initial estimate until the grant date occurs. In the period in which the grant date occurs, the grantor should change the transaction price for the cumulative effect of measuring the fair value at the grant date rather than the fair value previously used at any prior reporting date. ##### [606-10-55-88C](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-88C) Pending content: yes Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:b2cfe3c1e38912434aa06cff2bfb9fa226f6156be118adba8159f388e9abeab4 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Transition date:(P) December 16, 2026; (N) December 16, 2026Transition guidance: [606-10-65-2](https://asc.understandingaccounting.org/asc/606/10/#606-10-65-2)Regardless of whether an award’s grant date has occurred, the guidance on constraining estimates of variable consideration in paragraphs [606-10-32-11 through 32-12](https://asc.understandingaccounting.org/asc/606/10/#606-10-32-11) should not be applied to share-based consideration payable to a customer that is measured and classified under Topic 718. ##### [606-10-55-89](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-89) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:1074a959a547148963591d8d9ce669920272843c6182f1eba54d1c93d537c873 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Paragraph [606-10-50-5](https://asc.understandingaccounting.org/asc/606/10/#606-10-50-5) requires an entity to disaggregate [revenue](https://asc.understandingaccounting.org/glossary/r/#revenue "Inflows or other enhancements of assets of an entity or settlements of its liabilities (or a combination of both) from delivering or producing goods, rendering services, or other activities that constitute the entity's ongoing major or central operations.") from [contracts](https://asc.understandingaccounting.org/glossary/c/#contract "An agreement between two or more parties that creates enforceable rights and obligations.") with [customers](https://asc.understandingaccounting.org/glossary/c/#customer "A party that has contracted with an entity to obtain goods or services that are an output of the entity's ordinary activities in exchange for consideration.") into categories that depict how the nature, amount, timing, and uncertainty of revenue and cash flows are affected by economic factors. Consequently, the extent to which an entity's revenue is disaggregated for the purposes of this disclosure depends on the facts and circumstances that pertain to the entity's contracts with customers. Some entities may need to use more than one type of category to meet the objective in paragraph [606-10-50-5](https://asc.understandingaccounting.org/asc/606/10/#606-10-50-5) for disaggregating revenue. Other entities may meet the objective by using only one type of category to disaggregate revenue. ##### [606-10-55-90](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-90) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:6e0a8e46c4356fb94e87f50675a03f698da0fae57ef7677976b7ff509dd3c615 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. When selecting the type of category (or categories) to use to disaggregate revenue, an entity should consider how information about the entity's revenue has been presented for other purposes, including all of the following: 1. a Disclosures presented outside the financial statements (for example, in earnings releases, annual reports, or investor presentations) 2. b Information regularly reviewed by the chief operating decision maker for evaluating the financial performance of operating segments 3. c Other information that is similar to the types of information identified in (a) and (b) and that is used by the entity or users of the entity's financial statements to evaluate the entity's financial performance or make resource allocation decisions. ##### [606-10-55-91](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-91) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:eb5fe6fda8b41f6eb78a07a5a4b220857480450e2b5233856cb81760cc3fe9fa Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Examples of categories that might be appropriate include, but are not limited to, all of the following: 1. a Type of good or service (for example, major product lines) 2. b Geographical region (for example, country or region) 3. c Market or type of customer (for example, government and nongovernment customers) 4. d Type of contract (for example, fixed-price and time-and-materials contracts) 5. e Contract duration (for example, short-term and long-term contracts) 6. f Timing of transfer of goods or services (for example, revenue from goods or services transferred to customers at a point in time and revenue from goods or services transferred over time) 7. g Sales channels (for example, goods sold directly to consumers and goods sold through intermediaries). #### Illustrations ##### [606-10-55-92](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-92) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:b511588cb86dd0f1d936512f84ce2919d0210d196e43cb3ddf4bdcf701667de3 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. These Examples portray hypothetical situations illustrating how an entity might apply some of the guidance in this Topic to particular aspects of a [contract](https://asc.understandingaccounting.org/glossary/c/#contract "An agreement between two or more parties that creates enforceable rights and obligations.") with a [customer](https://asc.understandingaccounting.org/glossary/c/#customer "A party that has contracted with an entity to obtain goods or services that are an output of the entity's ordinary activities in exchange for consideration.") on the basis of the limited facts presented. The analysis in each Example is not intended to represent the only manner in which the guidance could be applied, nor are the Examples intended to only apply to the specific industry illustrated. Although some aspects of the Examples may be present in actual fact patterns, all relevant facts and circumstances of a particular fact pattern would need to be evaluated when applying the guidance in this Topic. ##### [606-10-55-93](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-93) Pending content: yes Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:9bf9efe6d216ad50e2a72c4525bf56e83ba58771aa7b6cb9ad0ffad969d05fd5 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The Examples are organized as follows: 1. a Identifying the Contract - Example 1—Collectibility of the Consideration - Example 2—Consideration Is Not the Stated Price—Implicit Price Concession - Example 3—Implicit Price Concession - Example 4—Reassessing the Criteria for Identifying a Contract 2. b Contract Modifications - Example 5—Modification of a Contract for Goods - Example 6—Change in the Transaction Price after a Contract Modification - Example 7—Modification of a Services Contract - Example 8—Modification Resulting in a Cumulative Catch-Up Adjustment to Revenue - Example 9—Unapproved Change in Scope and Price 3. c Identifying Performance Obligations - Example 10—Goods and Services Are Not Distinct - Example 11—Determining Whether Goods or Services Are Distinct - Example 12—Explicit and Implicit Promises in a Contract - Example 12A—Series of Distinct Goods or Services 4. d Performance Obligations Satisfied Over Time - Example 13—Customer Simultaneously Receives and Consumes the Benefits - Example 14—Assessing Alternative Use and Right to Payment - Example 15—Asset Has No Alternative Use to the Entity - Example 16—Enforceable Right to Payment for Performance Completed to Date - Example 17—Assessing Whether a Performance Obligation Is Satisfied at a Point in Time or Over Time 5. e Measuring Progress toward Complete Satisfaction of a Performance Obligation - Example 18—Measuring Progress When Making Goods or Services Available - Example 19—Uninstalled Materials 6. f Variable Consideration - Example 20—Penalty Gives Rise to Variable Consideration - Example 21—Estimating Variable Consideration 7. g Constraining Estimates of Variable Consideration - Example 22—Right of Return - Example 23—Price Concessions - Example 24—Volume Discount Incentive - Example 25—Management Fees Subject to the Constraint 8. h The Existence of a Significant Financing Component in the Contract - Example 26—Significant Financing Component and Right of Return - Example 27—Withheld Payments on a Long-Term Contract - Example 28—Determining the Discount Rate - Example 29—Advance Payment and Assessment of the Discount Rate - Example 30—Advance Payment 9. i Noncash Consideration - Example 31—Entitlement to Noncash Consideration 10. j Consideration Payable to a Customer - Example 32—Consideration Payable to a Customer 11. k Allocating the Transaction Price to Performance Obligations - Example 33—Allocation Methodology - Example 34—Allocating a Discount - Example 35—Allocation of Variable Consideration 12. l Contract Costs - Example 36—Incremental Costs of Obtaining a Contract - Example 37—Costs That Give Rise to an Asset 13. m Presentation - Example 38—Contract Liability and Receivable - Example 39—Contract Asset Recognized for the Entity's Performance - Example 40—Receivable Recognized for the Entity's Performance 14. n Disclosure - Example 41—Disaggregation of Revenue Quantitative Disclosure - Example 42—Disclosure of the Transaction Price Allocated to the Remaining Performance Obligations - Example 43—Disclosure of the Transaction Price Allocated to the Remaining Performance Obligations—Qualitative 15. o Warranties - Example 44—Warranties 16. p Principal versus Agent Considerations - Example 45—Arranging for the Provision of Goods or Services (Entity Is an Agent) - Example 46—Promise to Provide Goods or Services (Entity Is a Principal) - Example 46A—Promise to Provide Goods or Services (Entity Is a Principal) - Example 47—Promise to Provide Goods or Services (Entity Is a Principal) - Example 48—Arranging for the Provision of Goods or Services (Entity Is an Agent) - Example 48A—Entity Is a Principal and an Agent in the Same Contract 17. q Customer Options for Additional Goods or Services - Example 49—Option That Provides the Customer with a Material Right (Discount Voucher) - Example 50—Option That Does Not Provide the Customer with a Material Right (Additional Goods or Services) - Example 51—Option That Provides the Customer with a Material Right (Renewal Option) - Example 52—Customer Loyalty Program 18. r Nonrefundable Upfront Fees - Example 53—Nonrefundable Upfront Fee 19. s Licensing - Example 54—Right to Use Intellectual Property - Example 55—License of Intellectual Property - Example 56—Identifying a Distinct License - Example 57—Franchise Rights - Example 58—Access to Intellectual Property - Example 59—Right to Use Intellectual Property - Example 60—Sales-Based Royalty Promised in Exchange for a License of Intellectual Property and Other Goods and Services - Example 61—Access to Intellectual Property - Example 61A—Right to Use Intellectual Property - Example 61B—Distinguishing Multiple Licenses from Attributes of a Single License 20. t Repurchase Agreements - Example 62—Repurchase Agreements 21. u Bill-and-Hold Arrangements - Example 63—Bill-and-Hold Arrangement Transition date:(P) December 16, 2026; (N) December 16, 2026Transition guidance: [606-10-65-3](https://asc.understandingaccounting.org/asc/606/10/#606-10-65-3)The Examples are organized as follows: 1. a Identifying the Contract - Example 1—Collectibility of the Consideration - Example 2—Consideration Is Not the Stated Price—Implicit Price Concession - Example 3—Implicit Price Concession - Example 4—Reassessing the Criteria for Identifying a Contract 2. b Contract Modifications - Example 5—Modification of a Contract for Goods - Example 6—Change in the Transaction Price after a Contract Modification - Example 7—Modification of a Services Contract - Example 8—Modification Resulting in a Cumulative Catch-Up Adjustment to Revenue - Example 9—Unapproved Change in Scope and Price 3. c Identifying Performance Obligations - Example 10—Goods and Services Are Not Distinct - Example 11—Determining Whether Goods or Services Are Distinct - Example 12—Explicit and Implicit Promises in a Contract - Example 12A—Series of Distinct Goods or Services 4. d Performance Obligations Satisfied Over Time - Example 13—Customer Simultaneously Receives and Consumes the Benefits - Example 14—Assessing Alternative Use and Right to Payment - Example 15—Asset Has No Alternative Use to the Entity - Example 16—Enforceable Right to Payment for Performance Completed to Date - Example 17—Assessing Whether a Performance Obligation Is Satisfied at a Point in Time or Over Time 5. e Measuring Progress toward Complete Satisfaction of a Performance Obligation - Example 18—Measuring Progress When Making Goods or Services Available - Example 19—Uninstalled Materials 6. f Variable Consideration - Example 20—Penalty Gives Rise to Variable Consideration - Example 21—Estimating Variable Consideration 7. g Constraining Estimates of Variable Consideration - Example 22—Right of Return - Example 23—Price Concessions - Example 24—Volume Discount Incentive - Example 25—Management Fees Subject to the Constraint 8. h The Existence of a Significant Financing Component in the Contract - Example 26—Significant Financing Component and Right of Return - Example 27—Withheld Payments on a Long-Term Contract - Example 28—Determining the Discount Rate - Example 29—Advance Payment and Assessment of the Discount Rate - Example 30—Advance Payment 9. i Noncash Consideration - Example 31—Entitlement to Noncash Consideration - Example 31A—Share-Based Noncash Consideration 10. j Consideration Payable to a Customer - Example 32—Consideration Payable to a Customer 11. k Allocating the Transaction Price to Performance Obligations - Example 33—Allocation Methodology - Example 34—Allocating a Discount - Example 35—Allocation of Variable Consideration 12. l Contract Costs - Example 36—Incremental Costs of Obtaining a Contract - Example 37—Costs That Give Rise to an Asset 13. m Presentation - Example 38—Contract Liability and Receivable - Example 39—Contract Asset Recognized for the Entity's Performance - Example 40—Receivable Recognized for the Entity's Performance 14. n Disclosure - Example 41—Disaggregation of Revenue Quantitative Disclosure - Example 42—Disclosure of the Transaction Price Allocated to the Remaining Performance Obligations - Example 43—Disclosure of the Transaction Price Allocated to the Remaining Performance Obligations—Qualitative 15. o Warranties - Example 44—Warranties 16. p Principal versus Agent Considerations - Example 45—Arranging for the Provision of Goods or Services (Entity Is an Agent) - Example 46—Promise to Provide Goods or Services (Entity Is a Principal) - Example 46A—Promise to Provide Goods or Services (Entity Is a Principal) - Example 47—Promise to Provide Goods or Services (Entity Is a Principal) - Example 48—Arranging for the Provision of Goods or Services (Entity Is an Agent) - Example 48A—Entity Is a Principal and an Agent in the Same Contract 17. q Customer Options for Additional Goods or Services - Example 49—Option That Provides the Customer with a Material Right (Discount Voucher) - Example 50—Option That Does Not Provide the Customer with a Material Right (Additional Goods or Services) - Example 51—Option That Provides the Customer with a Material Right (Renewal Option) - Example 52—Customer Loyalty Program 18. r Nonrefundable Upfront Fees - Example 53—Nonrefundable Upfront Fee 19. s Licensing - Example 54—Right to Use Intellectual Property - Example 55—License of Intellectual Property - Example 56—Identifying a Distinct License - Example 57—Franchise Rights - Example 58—Access to Intellectual Property - Example 59—Right to Use Intellectual Property - Example 60—Sales-Based Royalty Promised in Exchange for a License of Intellectual Property and Other Goods and Services - Example 61—Access to Intellectual Property - Example 61A—Right to Use Intellectual Property - Example 61B—Distinguishing Multiple Licenses from Attributes of a Single License 20. t Repurchase Agreements - Example 62—Repurchase Agreements 21. u Bill-and-Hold Arrangements - Example 63—Bill-and-Hold Arrangement ##### [606-10-55-94](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-94) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:86e4517a1f940c9b2c86d7e5980cf2f259d765d15cc47790f34baa87a2af09b5 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Examples 1-4 illustrate the guidance in paragraphs [606-10-25-1 through 25-8](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-1) on identifying the contract. In addition, the following guidance is illustrated in these Examples: 1. a Paragraph [606-10-25-1(e)](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-1) and paragraphs [606-10-55-3A through 55-3C](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-3A) on assessing collectibility (Example 1) 2. b The interaction of paragraph [606-10-25-1](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-1) with paragraphs [606-10-32-2](https://asc.understandingaccounting.org/asc/606/10/#606-10-32-2) and [606-10-32-7](https://asc.understandingaccounting.org/asc/606/10/#606-10-32-7) on estimating variable consideration (Examples 2 and 3) 3. c Paragraph [606-10-55-65](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-65) on consideration in the form of sales-based or usage-based royalties on licenses of intellectual property (Example 4). ##### [606-10-55-95](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-95) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:db22230310424de871dceba066046a11daada440cfcf2a9179feedbf6f378abe Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An entity, a real estate developer, enters into a contract with a customer for the sale of a building for $1 million. The customer intends to open a restaurant in the building. The building is located in an area where new restaurants face high levels of competition, and the customer has little experience in the restaurant industry. ##### [606-10-55-96](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-96) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:bac08d52a84f985f725a994e4338f2121ab978ae41f14854fa81fedd8561dbfc Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The customer pays a nonrefundable deposit of $50,000 at inception of the contract and enters into a long-term financing agreement with the entity for the remaining 95 percent of the promised consideration. The financing arrangement is provided on a nonrecourse basis, which means that if the customer defaults, the entity can repossess the building but cannot seek further compensation from the customer, even if the collateral does not cover the full value of the amount owed. ##### [606-10-55-97](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-97) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:45fd04b6a653d863ed97a31c69c70cf38e3e4b7b777ce5f30f825e35b238b672 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The entity concludes that not all of the criteria in paragraph [606-10-25-1](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-1) are met. The entity concludes that the criterion in paragraph [606-10-25-1(e)](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-1) is not met because it is not probable that the entity will collect substantially all of the consideration to which it is entitled in exchange for the transfer of the building. In reaching this conclusion, the entity observes that the customer's ability and intention to pay may be in doubt because of the following factors: 1. a The customer intends to repay the loan (which has a significant balance) primarily from income derived from its restaurant business (which is a business facing significant risks because of high competition in the industry and the customer's limited experience). 2. b The customer lacks other income or assets that could be used to repay the loan. 3. c The customer's liability under the loan is limited because the loan is nonrecourse. ##### [606-10-55-98](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-98) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:8b164adbccb59264f9790009499e196a4f7ca7aee63c32f0724698616dbf224b Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The entity continues to assess the contract in accordance with paragraph [606-10-25-6](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-6) to determine whether the criteria in paragraph [606-10-25-1](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-1) are subsequently met or whether the events in paragraph [606-10-25-7](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-7) have occurred. ##### [606-10-55-98A](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-98A) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:00636cea1792cfe7b6fafc3024bcdbfea3645edb442c38950dcf38469847e312 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An entity, a service provider, enters into a three-year service contract with a new customer of low credit quality at the beginning of a calendar month. ##### [606-10-55-98B](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-98B) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:ed68e7d1c6c21fc65b4b436a76bafc87d48d8b432427c94968c0aaa836f20971 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The transaction price of the contract is $720, and $20 is due at the end of each month. The standalone selling price of the monthly service is $20. Both parties are subject to termination penalties if the contract is cancelled. ##### [606-10-55-98C](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-98C) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:39fbd5c95ccaa16634f66cb8e6e1582172cefa8e9bd0305a4bd4884f266cffc6 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The entity's history with this class of customer indicates that while the entity cannot conclude it is probable the customer will pay the transaction price of $720, the customer is expected to make the payments required under the contract for at least 9 months. If, during the contract term, the customer stops making the required payments, the entity's customary business practice is to limit its credit risk by not transferring further services to the customer and to pursue collection for the unpaid services. ##### [606-10-55-98D](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-98D) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:d7bc804a0eaca33d4bc6d0d7cd4cf4f184c02c0b7b7237f3c517f78415f318e5 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. In assessing whether the contract meets the criteria in paragraph [606-10-25-1](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-1), the entity assesses whether it is probable that the entity will collect substantially all of the consideration to which it will be entitled in exchange for the services that will be transferred to the customer. This includes assessing the entity's history with this class of customer in accordance with paragraph [606-10-55-3B](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-3B) and its business practice of stopping service in response to customer nonpayment in accordance with paragraph [606-10-55-3C](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-3C). Consequently, as part of this analysis, the entity does not consider the likelihood of payment for services that would not be provided in the event of the customer's nonpayment because the entity is not exposed to credit risk for those services. ##### [606-10-55-98E](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-98E) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:49f91a72a4388461b5bd89098608aa63f8473a0f5382ad77ed318eea1762eef4 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. It is not probable that the entity will collect the entire transaction price ($720) because of the customer's low credit rating. However, the entity's exposure to credit risk is mitigated because the entity has the ability and intention (as evidenced by its customary business practice) to stop providing services if the customer does not pay the promised consideration for services provided when it is due. Therefore, the entity concludes that the contract meets the criterion in paragraph [606-10-25-1(e)](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-1) because it is probable that the customer will pay substantially all of the consideration to which the entity is entitled for the services the entity will transfer to the customer (that is, for the services the entity will provide for as long as the customer continues to pay for the services provided). Consequently, assuming the criteria in paragraph [606-10-25-1(a) through (d)](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-1) are met, the entity would apply the remaining guidance in this Topic to recognize revenue and only reassess the criteria in paragraph [606-10-25-1](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-1) if there is an indication of a significant change in facts or circumstances such as the customer not making its required payments. ##### [606-10-55-98F](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-98F) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:320f82bba89a77c5dc860dd4b61844838895a73c4934e9fab04fa53bc590ac91 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The same facts as in Case B apply to Case C, except that the entity's history with this class of customer indicates that there is a risk that the customer will not pay substantially all of the consideration for services received from the entity, including the risk that the entity will never receive any payment for any services provided. ##### [606-10-55-98G](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-98G) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:dbbbb425558f1cd73887710bdc58e5e341fc15f97d093882b1f5e7be0e6c6794 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. In assessing whether the contract with the customer meets the criteria in paragraph [606-10-25-1](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-1), the entity assesses whether it is probable that it will collect substantially all of the consideration to which it will be entitled in exchange for the goods or services that will be transferred to the customer. This includes assessing the entity's history with this class of customer and its business practice of stopping service in response to the customer's nonpayment in accordance with paragraph [606-10-55-3C](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-3C). ##### [606-10-55-98H](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-98H) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:9ca92917f1acf30558295e3b29f550d4eb0a2917d0fa9ddccf1fe48d2e327531 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. At contract inception, the entity concludes that the criterion in paragraph [606-10-25-1(e)](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-1) is not met because it is not probable that the customer will pay substantially all of the consideration to which the entity will be entitled under the contract for the services that will be transferred to the customer. The entity concludes that not only is there a risk that the customer will not pay for services received from the entity, but also there is a risk that the entity will never receive any payment for any services provided. Subsequently, when the customer initially pays for one month of service, the entity accounts for the consideration received in accordance with paragraphs [606-10-25-7 through 25-8](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-7) . The entity concludes that none of the events in paragraph [606-10-25-7](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-7) have occurred because the contract has not been terminated, the entity has not received substantially all of the consideration promised in the contract, and the entity is continuing to provide services to the customer. ##### [606-10-55-98I](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-98I) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:365d4e0542828cfb756d282a1baf94b45c4eca308a9f62498fccec07810b4c54 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Assume that the customer has made timely payments for several months. In accordance with paragraph [606-10-25-6](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-6), the entity assesses the contract to determine whether the criteria in paragraph [606-10-25-1](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-1) are subsequently met. In making that evaluation, the entity considers, among other things, its experience with this specific customer. On the basis of the customer's performance under the contract, the entity concludes that the criteria in [606-10-25-1](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-1) have been met, including the collectibility criterion in paragraph [606-10-25-1(e)](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-1). Once the criteria in paragraph [606-10-25-1](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-1) are met, the entity applies the remaining guidance in this Topic to recognize revenue. ##### [606-10-55-98J](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-98J) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:7b42f5ef24033419ccbc37a65101a5b721e8b5e39c0c031f0d035a168550c56f Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An entity, a health club, enters into a one-year membership with a customer of low credit quality. The transaction price of the contract is $120, and $10 is due at the beginning of each month. The standalone selling price of the monthly service is $10. ##### [606-10-55-98K](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-98K) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:f3456b3a4448890c0d6cd7d342148e53cb866e79f1ec82a166cd533deaad7abd Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. On the basis of the customer's credit history and in accordance with the entity's customary business practice, the customer is required to pay each month before the entity provides the customer with access to the health club. In response to nonpayment, the entity's customary business practice is to stop providing service to the customer upon nonpayment. The entity does not have exposure to credit risk because all payments are made in advance and the entity does not provide services unless the advance payment has been received. ##### [606-10-55-98L](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-98L) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:fe3e981a28aca1c4f0c534df090e9a40a7b40cb05b2ed6a413237fb3f15daf8d Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The contract meets the criterion in paragraph [606-10-25-1(e)](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-1) because it is probable that the entity will collect the consideration to which it will be entitled in exchange for the services that will be transferred to the customer (that is, one month of payment in advance for each month of service). ##### [606-10-55-99](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-99) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:51aed9310c4b37eae266e95d1e3cec5dab7a4b17e44432325cb30a64669419d9 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An entity sells 1,000 units of a prescription drug to a customer for promised consideration of $1 million. This is the entity's first sale to a customer in a new region, which is experiencing significant economic difficulty. Thus, the entity expects that it will not be able to collect from the customer the full amount of the promised consideration. Despite the possibility of not collecting the full amount, the entity expects the region's economy to recover over the next two to three years and determines that a relationship with the customer could help it to forge relationships with other potential customers in the region. ##### [606-10-55-100](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-100) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:b0181ba92327b9b760e36f85be7bf0383ac0c2d66b8078a63b67a67804fd6aa1 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. When assessing whether the criterion in paragraph [606-10-25-1(e)](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-1) is met, the entity also considers paragraphs [606-10-32-2](https://asc.understandingaccounting.org/asc/606/10/#606-10-32-2) and [606-10-32-7(b)](https://asc.understandingaccounting.org/asc/606/10/#606-10-32-7). Based on the assessment of the facts and circumstances, the entity determines that it expects to provide a price concession and accept a lower amount of consideration from the customer. Accordingly, the entity concludes that the transaction price is not $1 million and, therefore, the promised consideration is variable. The entity estimates the variable consideration and determines that it expects to be entitled to $400,000. ##### [606-10-55-101](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-101) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:3db12811d987bf30f830500145222917eece9b29ffeaa340f4f31a55b59cf43a Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The entity considers the customer's ability and intention to pay the consideration and concludes that even though the region is experiencing economic difficulty it is probable that it will collect $400,000 from the customer. Consequently, the entity concludes that the criterion in paragraph [606-10-25-1(e)](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-1) is met based on an estimate of variable consideration of $400,000. In addition, based on an evaluation of the contract terms and other facts and circumstances, the entity concludes that the other criteria in paragraph [606-10-25-1](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-1) are also met. Consequently, the entity accounts for the contract with the customer in accordance with the guidance in this Topic. ##### [606-10-55-102](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-102) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:bc8d580a299dd32fbec12a94ddf9ca34c4236a3a2f6cfd9f28fd32577ae63133 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An entity, a hospital, provides medical services to an uninsured patient in the emergency room. The entity has not previously provided medical services to this patient but is required by law to provide medical services to all emergency room patients. Because of the patient's condition upon arrival at the hospital, the entity provides the services immediately and, therefore, before the entity can determine whether the patient is committed to perform its obligations under the contract in exchange for the medical services provided. Consequently, the contract does not meet the criteria in paragraph [606-10-25-1](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-1), and in accordance with paragraph [606-10-25-6](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-6), the entity will continue to assess its conclusion based on updated facts and circumstances. ##### [606-10-55-103](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-103) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:576536f437530496d7d9c37404ee02209413a22886a2e4728d0915371d691359 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. After providing services, the entity obtains additional information about the patient including a review of the services provided, standard rates for such services, and the patient's ability and intention to pay the entity for the services provided. During the review, the entity notes its standard rate for the services provided in the emergency room is $10,000. The entity also reviews the patient's information and to be consistent with its policies designates the patient to a customer class based on the entity's assessment of the patient's ability and intention to pay. The entity determines that the services provided are not charity care based on the entity's internal policy and the patient's income level. In addition, the patient does not qualify for governmental subsidies. ##### [606-10-55-104](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-104) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:d43810096dd4e70f5d43e14ba3385c35d37978a6f0d2d1711806200d11f00f3d Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Before reassessing whether the criteria in paragraph [606-10-25-1](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-1) have been met, the entity considers paragraphs [606-10-32-2](https://asc.understandingaccounting.org/asc/606/10/#606-10-32-2) and [606-10-32-7(b)](https://asc.understandingaccounting.org/asc/606/10/#606-10-32-7). Although the standard rate for the services is $10,000 (which may be the amount invoiced to the patient), the entity expects to accept a lower amount of consideration in exchange for the services. Accordingly, the entity concludes that the transaction price is not $10,000 and, therefore, the promised consideration is variable. The entity reviews its historical cash collections from this customer class and other relevant information about the patient. The entity estimates the variable consideration and determines that it expects to be entitled to $1,000. ##### [606-10-55-105](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-105) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:c3b50720e5868797f4af0d7d1fcde9eb6a7ad4223f9e02d27f0f21ec1df29f7c Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. In accordance with paragraph [606-10-25-1(e)](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-1), the entity evaluates the patient's ability and intention to pay (that is, the credit risk of the patient). On the basis of its collection history from patients in this customer class, the entity concludes it is probable that the entity will collect $1,000 (which is the estimate of variable consideration). In addition, on the basis of an assessment of the contract terms and other facts and circumstances, the entity concludes that the other criteria in paragraph [606-10-25-1](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-1) also are met. Consequently, the entity accounts for the contract with the patient in accordance with the guidance in this Topic. ##### [606-10-55-106](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-106) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:eff6527105b0b2ddc3e1696fbdfb8219867c0a283d71269c7dd8c6d493365da6 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An entity licenses a patent to a customer in exchange for a usage-based royalty. At contract inception, the contract meets all the criteria in paragraph [606-10-25-1](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-1), and the entity accounts for the contract with the customer in accordance with the guidance in this Topic. The entity recognizes revenue when the customer's subsequent usage occurs in accordance with paragraph [606-10-55-65](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-65). ##### [606-10-55-107](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-107) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:ef52c6ab7679734572f6da82fb5fb000231a8cad0d151246e0c76f84403e6a4b Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Throughout the first year of the contract, the customer provides quarterly reports of usage and pays within the agreed-upon period. ##### [606-10-55-108](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-108) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:bd7c0df0ef3d532d6b89f7bca1c559a248476db8feb26285b193eee08f92c754 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. During the second year of the contract, the customer continues to use the entity's patent, but the customer's financial condition declines. The customer's current access to credit and available cash on hand are limited. The entity continues to recognize revenue on the basis of the customer's usage throughout the second year. The customer pays the first quarter's royalties but makes nominal payments for the usage of the patent in quarters 2-4. The entity accounts for any credit losses on the existing receivable in accordance with Subtopic 326-20 on financial instruments measured at amortized cost. ##### [606-10-55-109](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-109) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:288ffec7d63d891bb53fb7cd7de4cf280ad9c3328838624b7aff63c521b1e3a9 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. During the third year of the contract, the customer continues to use the entity's patent. However, the entity learns that the customer has lost access to credit and its major customers and thus the customer's ability to pay significantly deteriorates. The entity therefore concludes that it is unlikely that the customer will be able to make any further royalty payments for ongoing usage of the entity's patent. As a result of this significant change in facts and circumstances, in accordance with paragraph [606-10-25-5](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-5), the entity reassesses the criteria in paragraph [606-10-25-1](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-1) and determines that they are not met because it is no longer probable that the entity will collect the consideration to which it will be entitled. Accordingly, the entity does not recognize any further revenue associated with the customer's future usage of its patent. The entity accounts for additional credit losses on the existing receivable in accordance with Subtopic 326-20. ##### [606-10-55-110](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-110) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:79c7a16540d477916cb3aa1fcbd1d36970d4735bd9ccd1be048c9dafcbf27c29 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Examples 5-9 illustrate the guidance in paragraphs [606-10-25-10 through 25-13](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-10) on contract modifications. In addition, the following guidance is illustrated in these Examples: 1. a Paragraphs [606-10-25-14 through 25-22](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-14) on identifying performance obligations (Examples 7 and 8) 2. b Paragraphs [606-10-32-11 through 32-13](https://asc.understandingaccounting.org/asc/606/10/#606-10-32-11) on constraining estimates of variable consideration (Examples 6, 8, and 9) 3. c Paragraphs [606-10-32-42 through 32-45](https://asc.understandingaccounting.org/asc/606/10/#606-10-32-42) on changes in the transaction price (Example 6). ##### [606-10-55-111](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-111) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:0fc7b45717a6571d54dc6442d4f9eb704376ff0064c2947985c59360f5ae573c Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An entity promises to sell 120 products to a customer for $12,000 ($100 per product). The products are transferred to the customer over a six-month period. The entity transfers control of each product at a point in time. After the entity has transferred control of 60 products to the customer, the contract is modified to require the delivery of an additional 30 products (a total of 150 identical products) to the customer. The additional 30 products were not included in the initial contract. ##### [606-10-55-112](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-112) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:428892ec1f06d8aca2dbf645c3f1f47dc9bb1ccff8b17519d191d4c3f190d9e0 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. When the contract is modified, the price of the contract modification for the additional 30 products is an additional $2,850 or $95 per product. The pricing for the additional products reflects the standalone selling price of the products at the time of the contract modification, and the additional products are distinct (in accordance with paragraph [606-10-25-19](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-19)) from the original products. ##### [606-10-55-113](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-113) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:c05469748c6a0b450a28ed5c401e5c01aeb9c98fbea6dcbd9eac273d8b0b4b5e Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. In accordance with paragraph [606-10-25-12](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-12), the contract modification for the additional 30 products is, in effect, a new and separate contract for future products that does not affect the accounting for the existing contract. The entity recognizes revenue of $100 per product for the 120 products in the original contract and $95 per product for the 30 products in the new contract. ##### [606-10-55-114](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-114) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:f2b94b4e08fb2bc8447f696facd68e0f07dc4b1d9f3f3b53eb2e36dbe3b0db43 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. During the process of negotiating the purchase of an additional 30 products, the parties initially agree on a price of $80 per product. However, the customer discovers that the initial 60 products transferred to the customer contained minor defects that were unique to those delivered products. The entity promises a partial credit of $15 per product to compensate the customer for the poor quality of those products. The entity and the customer agree to incorporate the credit of $900 ($15 credit × 60 products) into the price that the entity charges for the additional 30 products. Consequently, the contract modification specifies that the price of the additional 30 products is $1,500 or $50 per product. That price comprises the agreed-upon price for the additional 30 products of $2,400, or $80 per product, less the credit of $900. ##### [606-10-55-115](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-115) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:55dc561d33afbebb8df716cb6f73a0b30c1c42680408a53f7d116e96fdf58e41 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. At the time of modification, the entity recognizes the $900 as a reduction of the transaction price and, therefore, as a reduction of revenue for the initial 60 products transferred. In accounting for the sale of the additional 30 products, the entity determines that the negotiated price of $80 per product does not reflect the standalone selling price of the additional products. Consequently, the contract modification does not meet the conditions in paragraph [606-10-25-12](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-12) to be accounted for as a separate contract. Because the remaining products to be delivered are distinct from those already transferred, the entity applies the guidance in paragraph [606-10-25-13(a)](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-13) and accounts for the modification as a termination of the original contract and the creation of a new contract. ##### [606-10-55-116](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-116) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:bfc9b648fd43dc2aba2c8ecafa721b951b4674b36a9d263c59ca1713e5622ecb Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Consequently, the amount recognized as revenue for each of the remaining products is a blended price of $93.33 {\[($100 × 60 products not yet transferred under the original contract) + ($80 × 30 products to be transferred under the contract modification)\] ÷ 90 remaining products}. ##### [606-10-55-117](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-117) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:889660383267bd3471093c3435d779cc981954eaa4d1301d5e79126150a3bedb Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. On July 1, 20X0, an entity promises to transfer two distinct products to a customer. Product X transfers to the customer at contract inception and Product Y transfers on March 31, 20X1. The consideration promised by the customer includes fixed consideration of $1,000 and variable consideration that is estimated to be $200. The entity includes its estimate of variable consideration in the transaction price because it concludes that it is probable that a significant reversal in cumulative revenue recognized will not occur when the uncertainty is resolved. ##### [606-10-55-118](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-118) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:601b2dc6d30efd40c0dc62c2f0c335e17d537ce5c86d180bf6274956e7d1567e Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The transaction price of $1,200 is allocated equally to the performance obligation for Product X and the performance obligation for Product Y. This is because both products have the same standalone selling prices and the variable consideration does not meet the criteria in paragraph [606-10-32-40](https://asc.understandingaccounting.org/asc/606/10/#606-10-32-40) that requires allocation of the variable consideration to one but not both of the performance obligations. ##### [606-10-55-119](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-119) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:a9a0d096fe4954ffad1c14359bf01da03e73a3c6419e88c45449d9598fa979cb Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. When Product X transfers to the customer at contract inception, the entity recognizes revenue of $600. ##### [606-10-55-120](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-120) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:304ad830d0125e187e15942efa39004fdb95bef1091b9c3b2fa9f64a4c35e2ac Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. On November 30, 20X0, the scope of the contract is modified to include the promise to transfer Product Z (in addition to the undelivered Product Y) to the customer on June 30, 20X1, and the price of the contract is increased by $300 (fixed consideration), which does not represent the standalone selling price of Product Z. The standalone selling price of Product Z is the same as the standalone selling prices of Products X and Y. ##### [606-10-55-121](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-121) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:66ec5a1dab0a779782a0b4972f7640f601b6538c2f59582fe81468fd2fdd389a Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The entity accounts for the modification as if it were the termination of the existing contract and the creation of a new contract. This is because the remaining Products Y and Z are distinct from Product X, which had transferred to the customer before the modification, and the promised consideration for the additional Product Z does not represent its standalone selling price. Consequently, in accordance with paragraph [606-10-25-13(a)](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-13), the consideration to be allocated to the remaining performance obligations comprises the consideration that had been allocated to the performance obligation for Product Y (which is measured at an allocated transaction price amount of $600) and the consideration promised in the modification (fixed consideration of $300). The transaction price for the modified contract is $900, and that amount is allocated equally to the performance obligation for Product Y and the performance obligation for Product Z (that is, $450 is allocated to each performance obligation). ##### [606-10-55-122](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-122) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:52bb6e09639df219f1fc8f2f73bfae61e08716fa2447b5f93382fcf995125593 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. After the modification but before the delivery of Products Y and Z, the entity revises its estimate of the amount of variable consideration to which it expects to be entitled to $240 (rather than the previous estimate of $200). The entity concludes that the change in estimate of the variable consideration can be included in the transaction price because it is probable that a significant reversal in cumulative revenue recognized will not occur when the uncertainty is resolved. Even though the modification was accounted for as if it were the termination of the existing contract and the creation of a new contract in accordance with paragraph [606-10-25-13(a)](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-13), the increase in the transaction price of $40 is attributable to variable consideration promised before the modification. Therefore, in accordance with paragraph [606-10-32-45](https://asc.understandingaccounting.org/asc/606/10/#606-10-32-45), the change in the transaction price is allocated to the performance obligations for Product X and Product Y on the same basis as at contract inception. Consequently, the entity recognizes revenue of $20 for Product X in the period in which the change in the transaction price occurs. Because Product Y had not transferred to the customer before the contract modification, the change in the transaction price that is attributable to Product Y is allocated to the remaining performance obligations at the time of the contract modification. This is consistent with the accounting that would have been required by paragraph [606-10-25-13(a)](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-13) if that amount of variable consideration had been estimated and included in the transaction price at the time of the contract modification. ##### [606-10-55-123](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-123) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:e28266ac311564bcbcd5d474480a459448ea2cd72807bb2cec88f71c3ed846de Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The entity also allocates the $20 increase in the transaction price for the modified contract equally to the performance obligations for Product Y and Product Z. This is because the products have the same standalone selling prices and the variable consideration does not meet the criteria in paragraph [606-10-32-40](https://asc.understandingaccounting.org/asc/606/10/#606-10-32-40) that require allocation of the variable consideration to one but not both of the performance obligations. Consequently, the amount of the transaction price allocated to the performance obligations for Product Y and Product Z increases by $10 to $460 each. ##### [606-10-55-124](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-124) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:5dd0558a27194f577813e50eb971a3ebee8329c43f0ff95988f89501cebb91fc Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. On March 31, 20X1, Product Y is transferred to the customer, and the entity recognizes revenue of $460. On June 30, 20X1, Product Z is transferred to the customer, and the entity recognizes revenue of $460. ##### [606-10-55-125](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-125) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:71b8915eeef938983bc6137d512f2a795255861f04113e04fd0cf5fd2a5e1b93 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An entity enters into a three-year contract to clean a customer's offices on a weekly basis. The customer promises to pay $100,000 per year. The standalone selling price of the services at contract inception is $100,000 per year. The entity recognizes revenue of $100,000 per year during the first 2 years of providing services. At the end of the second year, the contract is modified and the fee for the third year is reduced to $80,000. In addition, the customer agrees to extend the contract for 3 additional years for consideration of $200,000 payable in 3 equal annual installments of $66,667 at the beginning of years 4, 5, and 6. The standalone selling price of the services for years 4 through 6 at the beginning of the third year is $80,000 per year. The entity's standalone selling price at the beginning of the third year, multiplied by the additional 3 years of services, is $240,000, which is deemed to be an appropriate estimate of the standalone selling price of the multiyear contract. ##### [606-10-55-126](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-126) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:78a8339f748c25049dda92c22f6049c9ebf4f83ab5e241bafb600b07527d7bd2 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. At contract inception, the entity assesses that each week of cleaning service is distinct in accordance with paragraph [606-10-25-19](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-19). Notwithstanding that each week of cleaning service is distinct, the entity accounts for the cleaning contract as a single performance obligation in accordance with paragraph [606-10-25-14(b)](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-14). This is because the weekly cleaning services are a series of distinct services that are substantially the same and have the same pattern of transfer to the customer (the services transfer to the customer over time and use the same method to measure progress—that is, a time-based measure of progress). ##### [606-10-55-127](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-127) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:a6dc747062891434ab2164229f162233338f81b4229be76d0c9e85cc436b76ca Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. At the date of the modification, the entity assesses the additional services to be provided and concludes that they are distinct. However, the price change does not reflect the standalone selling price. ##### [606-10-55-128](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-128) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:e6f3f370424d671b5e2d9238b1e138254790a92ae7ee1a05d2ad426dde47d104 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Consequently, the entity accounts for the modification in accordance with paragraph [606-10-25-13(a)](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-13) as if it were a termination of the original contract and the creation of a new contract with consideration of $280,000 for 4 years of cleaning service. The entity recognizes revenue of $70,000 per year ($280,000 ÷ 4 years) as the services are provided over the remaining 4 years. ##### [606-10-55-129](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-129) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:222c05d698c4e41823c753a850685b1948771658e4835d088a5d95a6f5606c16 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An entity, a construction company, enters into a contract to construct a commercial building for a customer on customer-owned land for promised consideration of $1 million and a bonus of $200,000 if the building is completed within 24 months. The entity accounts for the promised bundle of goods and services as a single performance obligation satisfied over time in accordance with paragraph [606-10-25-27(b)](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-27) because the customer controls the building during construction. At the inception of the contract, the entity expects the following: - ![](https://asc.understandingaccounting.org/asc-img/GUID-6EEEE3BF-87C5-4F69-997F-09EDDFF93D79-low.gif) Transaction price " $1,000,000 " Expected costs " 700,000 " Expected profit (30%) " $300,000 " ##### [606-10-55-130](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-130) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:4bd8cc1b58b86f8a53d2928a69e676d369394484515e727a287153fae59bb09f Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. At contract inception, the entity excludes the $200,000 bonus from the transaction price because it cannot conclude that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur. Completion of the building is highly susceptible to factors outside the entity's influence, including weather and regulatory approvals. In addition, the entity has limited experience with similar types of contracts. ##### [606-10-55-131](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-131) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:c3fbf2d7d9c915a341177be61ded3b39fac3d7b6a8ff3d32d63247bb61e11e30 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The entity determines that the input measure, on the basis of costs incurred, provides an appropriate measure of progress toward complete satisfaction of the performance obligation. By the end of the first year, the entity has satisfied 60 percent of its performance obligation on the basis of costs incurred to date ($420,000) relative to total expected costs ($700,000). The entity reassesses the variable consideration and concludes that the amount is still constrained in accordance with paragraphs [606-10-32-11 through 32-13](https://asc.understandingaccounting.org/asc/606/10/#606-10-32-11) . Consequently, the cumulative revenue and costs recognized for the first year are as follows: - ![](https://asc.understandingaccounting.org/asc-img/GUID-2921D8F8-375A-4EF0-A5CC-647C53338410-low.gif) Revenue " $600,000 " Costs " 420,000 " Gross profit " $180,000 " ##### [606-10-55-132](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-132) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:33490abd55e7629dedc02a60d4d9c2bdd0e2385f84c61c58981a5612b7160a35 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. In the first quarter of the second year, the parties to the contract agree to modify the contract by changing the floor plan of the building. As a result, the fixed consideration and expected costs increase by $150,000 and $120,000, respectively. Total potential consideration after the modification is $1,350,000 ($1,150,000 fixed consideration + $200,000 completion bonus). In addition, the allowable time for achieving the $200,000 bonus is extended by 6 months to 30 months from the original contract inception date. At the date of the modification, on the basis of its experience and the remaining work to be performed, which is primarily inside the building and not subject to weather conditions, the entity concludes that it is probable that including the bonus in the transaction price will not result in a significant reversal in the amount of cumulative revenue recognized in accordance with paragraph [606-10-32-11](https://asc.understandingaccounting.org/asc/606/10/#606-10-32-11) and includes the $200,000 in the transaction price. In assessing the contract modification, the entity evaluates paragraph [606-10-25-19(b)](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-19) and concludes (on the basis of the factors in paragraph [606-10-25-21](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-21)) that the remaining goods and services to be provided using the modified contract are not distinct from the goods and services transferred on or before the date of contract modification; that is, the contract remains a single performance obligation. ##### [606-10-55-133](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-133) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:806d635e71dcdd97b0d3195b7e0f5fe46b70b88f47f49d14f153fd153c7bc9a9 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Consequently, the entity accounts for the contract modification as if it were part of the original contract (in accordance with paragraph [606-10-25-13(b)](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-13)). The entity updates its measure of progress and estimates that it has satisfied 51.2 percent of its performance obligation ($420,000 actual costs incurred ÷ $820,000 total expected costs). The entity recognizes additional revenue of $91,200 \[(51.2 percent complete × $1,350,000 modified transaction price) - $600,000 revenue recognized to date\] at the date of the modification as a cumulative catch-up adjustment. ##### [606-10-55-134](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-134) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:0934577905ef06ae57cd4c4a249f921d690ca41a4ff6020a1702746067416105 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An entity enters into a contract with a customer to construct a building on customer-owned land. The contract states that the customer will provide the entity with access to the land within 30 days of contract inception. However, the entity was not provided access until 120 days after contract inception because of storm damage to the site that occurred after contract inception. The contract specifically identifies any delay (including force majeure) in the entity's access to customer-owned land as an event that entitles the entity to compensation that is equal to actual costs incurred as a direct result of the delay. The entity is able to demonstrate that the specific direct costs were incurred as a result of the delay in accordance with the terms of the contract and prepares a claim. The customer initially disagreed with the entity's claim. ##### [606-10-55-135](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-135) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:a44ddfad3dbb98de0687c4848fa6cb693af33b898567d77b4ed27539def035c0 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The entity assesses the legal basis of the claim and determines, on the basis of the underlying contractual terms, that it has enforceable rights. Consequently, it accounts for the claim as a contract modification in accordance with paragraphs [606-10-25-10 through 25-13](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-10) . The modification does not result in any additional goods and services being provided to the customer. In addition, all of the remaining goods and services after the modification are not distinct and form part of a single performance obligation. Consequently, the entity accounts for the modification in accordance with paragraph [606-10-25-13(b)](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-13) by updating the transaction price and the measure of progress toward complete satisfaction of the performance obligation. The entity considers the constraint on estimates of variable consideration in paragraphs [606-10-32-11 through 32-13](https://asc.understandingaccounting.org/asc/606/10/#606-10-32-11) when estimating the transaction price. ##### [606-10-55-136](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-136) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:7d21e39dd6852e09e93b20e979c9b33ff2a6f8e93758eac88fb110c571a5b832 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Examples 10-12A illustrate the guidance in paragraphs [606-10-25-14 through 25-22](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-14) on identifying performance obligations. ##### [606-10-55-137](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-137) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:aded0f552d0b27200b39b988041915fed96b82873461c574c80fafe321212406 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An entity, a contractor, enters into a contract to build a hospital for a customer. The entity is responsible for the overall management of the project and identifies various promised goods and services, including engineering, site clearance, foundation, procurement, construction of the structure, piping and wiring, installation of equipment, and finishing. ##### [606-10-55-138](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-138) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:e3fb2994aed753062731721e059b0df118a8c04c7c10e091dd011b7d8f9b5064 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The promised goods and services are capable of being distinct in accordance with paragraph [606-10-25-19(a)](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-19). That is, the customer can benefit from the goods and services either on their own or together with other readily available resources. This is evidenced by the fact that the entity, or competitors of the entity, regularly sells many of these goods and services separately to other customers. In addition, the customer could generate economic benefit from the individual goods and services by using, consuming, selling, or holding those goods or services. ##### [606-10-55-139](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-139) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:5c4dddf1a2788df6faec5ea4cc2c0fae63f49f272fa13f86da3bc821ccdaf5fe Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. However, the promises to transfer the goods and services are not separately identifiable in accordance with paragraph [606-10-25-19(b)](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-19) (on the basis of the factors in paragraph [606-10-25-21](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-21)). This is evidenced by the fact that the entity provides a significant service of integrating the goods and services (the inputs) into the hospital (the combined output) for which the customer has contracted. ##### [606-10-55-140](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-140) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:e7f06f5e8c25b3e758d2d708b3bc184b216715ea9ca86559b733c3d245f9798e Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Because both criteria in paragraph [606-10-25-19](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-19) are not met, the goods and services are not distinct. The entity accounts for all of the goods and services in the contract as a single performance obligation. ##### [606-10-55-140A](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-140A) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:4bb653539a5eec38e709c9ff85bce65d1735bfa118bc22130bdb9752c3d3bc2d Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An entity enters into a contract with a customer that will result in the delivery of multiple units of a highly complex, specialized device. The terms of the contract require the entity to establish a manufacturing process in order to produce the contracted units. The specifications are unique to the customer based on a custom design that is owned by the customer and that were developed under the terms of a separate contract that is not part of the current negotiated exchange. The entity is responsible for the overall management of the contract, which requires the performance and integration of various activities including procurement of materials; identifying and managing subcontractors; and performing manufacturing, assembly, and testing. ##### [606-10-55-140B](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-140B) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:9dc1ad108e686209f5b7994ca30c615a16e379944010cba0a2d06c1f1cd452f2 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The entity assesses the promises in the contract and determines that each of the promised devices is capable of being distinct in accordance with paragraph [606-10-25-19(a)](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-19) because the customer can benefit from each device on its own. This is because each unit can function independently of the other units. ##### [606-10-55-140C](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-140C) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:f25ce253c3a73f4259cd81c592e51c5f77a3927264044947abd057d3eb67f169 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The entity observes that the nature of its promise is to establish and provide a service of producing the full complement of devices for which the customer has contracted in accordance with the customer's specifications. The entity considers that it is responsible for overall management of the contract and for providing a significant service of integrating various goods and services (the inputs) into its overall service and the resulting devices (the combined output) and, therefore, the devices and the various promised goods and services inherent in producing those devices are not separately identifiable in accordance with paragraphs [606-10-25-19(b)](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-19) and [606-10-25-21](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-21). In this Case, the manufacturing process provided by the entity is specific to its contract with the customer. In addition, the nature of the entity's performance and, in particular, the significant integration service of the various activities mean that a change in one of the entity's activities to produce the devices has a significant effect on the other activities required to produce the highly complex specialized devices such that the entity's activities are highly interdependent and highly interrelated. Because the criterion in paragraph [606-10-25-19(b)](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-19) is not met, the goods and services that will be provided by the entity are not separately identifiable, and, therefore, are not distinct. The entity accounts for all of the goods and services promised in the contract as a single performance obligation. ##### [606-10-55-140D](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-140D) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:8610aa126084c41464e8d3f58dc8778994e8031d142920d3937b40e3b1686e02 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An entity grants a customer a three-year term license to anti-virus software and promises to provide the customer with when-and-if available updates to that software during the license period. The entity frequently provides updates that are critical to the continued utility of the software. Without the updates, the customer's ability to benefit from the software would decline significantly during the three-year arrangement. ##### [606-10-55-140E](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-140E) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:526dd2460d49e616f6cf57c201e4e6521d9b0b582d9a0beb7fff46d89cdb702c Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The entity concludes that the software and the updates are each promised goods or services in the contract and are each capable of being distinct in accordance with paragraph [606-10-25-19(a)](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-19). The software and the updates are capable of being distinct because the customer can derive economic benefit from the software on its own throughout the license period (that is, without the updates the software would still provide its original functionality to the customer), while the customer can benefit from the updates together with the software license transferred at the outset of the contract. ##### [606-10-55-140F](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-140F) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:51d36ae978c8f692365dcf423e9808e4560f9d9aca188b8897047e53fc844bd8 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The entity concludes that its promises to transfer the software license and to provide the updates, when-and-if available, are not separately identifiable (in accordance with paragraph [606-10-25-19(b)](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-19)) because the license and the updates are, in effect, inputs to a combined item (anti-virus protection) in the contract. The updates significantly modify the functionality of the software (that is, they permit the software to protect the customer from a significant number of additional viruses that the software did not protect against previously) and are integral to maintaining the utility of the software license to the customer. Consequently, the license and updates fulfill a single promise to the customer in the contract (a promise to provide protection from computer viruses for three years). Therefore, in this Example, the entity accounts for the software license and the when-and-if available updates as a single performance obligation. In accordance with paragraph [606-10-25-33](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-33), the entity concludes that the nature of the combined good or service it promised to transfer to the customer in this Example is computer virus protection for three years. The entity considers the nature of the combined good or service (that is, to provide anti-virus protection for three years) in determining whether the performance obligation is satisfied over time or at a point in time in accordance with paragraphs [606-10-25-23 through 25-30](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-23) and in determining the appropriate method for measuring progress toward complete satisfaction of the performance obligation in accordance with paragraphs [606-10-25-31 through 25-37](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-31) . ##### [606-10-55-141](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-141) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:d395aa47a6141f943f5261c4dd7594754253b43f4a5e7d073511775b1092abcc Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An entity, a software developer, enters into a contract with a customer to transfer a software license, perform an installation service, and provide unspecified software updates and technical support (online and telephone) for a two-year period. The entity sells the license, installation service, and technical support separately. The installation service includes changing the web screen for each type of user (for example, marketing, inventory management, and information technology). The installation service is routinely performed by other entities and does not significantly modify the software. The software remains functional without the updates and the technical support. ##### [606-10-55-142](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-142) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:01be6d54178ee2528a3c96ea7c5597e5d27c682132542b68862eb38da1372083 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The entity assesses the goods and services promised to the customer to determine which goods and services are distinct in accordance with paragraph [606-10-25-19](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-19). The entity observes that the software is delivered before the other goods and services and remains functional without the updates and the technical support. The customer can benefit from the updates together with the software license transferred at the outset of the contract. Thus, the entity concludes that the customer can benefit from each of the goods and services either on their own or together with the other goods and services that are readily available and the criterion in paragraph [606-10-25-19(a)](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-19) is met. ##### [606-10-55-143](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-143) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:1c57ab158c7f688da04f5c866bc313d4aa724e88d51f3bfc1d2e9f58591616a9 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The entity also considers the principle and the factors in paragraph [606-10-25-21](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-21) and determines that the promise to transfer each good and service to the customer is separately identifiable from each of the other promises (thus, the criterion in paragraph [606-10-25-19(b)](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-19) is met). In reaching this determination the entity considers that although it integrates the software into the customer's system, the installation services do not significantly affect the customer's ability to use and benefit from the software license because the installation services are routine and can be obtained from alternate providers. The software updates do not significantly affect the customer's ability to use and benefit from the software license because, in contrast with Example 10 (Case C), the software updates in this contract are not necessary to ensure that the software maintains a high level of utility to the customer during the license period. The entity further observes that none of the promised goods or services significantly modify or customize one another and the entity is not providing a significant service of integrating the software and the services into a combined output. Lastly, the entity concludes that the software and the services do not significantly affect each other and, therefore, are not highly interdependent or highly interrelated because the entity would be able to fulfill its promise to transfer the initial software license independent from its promise to subsequently provide the installation service, software updates, or technical support. ##### [606-10-55-144](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-144) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:fa5a56dd6ec29611e7d40cc5cb2825ea4ab2d008d986892e9a3480099789be33 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. On the basis of this assessment, the entity identifies four performance obligations in the contract for the following goods or services: 1. a The software license 2. b An installation service 3. c Software updates 4. d Technical support. ##### [606-10-55-145](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-145) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:3c375843a691eef34d94b3f4226d964947f0849a40f4bf41826baa6bbe5027d9 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The entity applies paragraphs [606-10-25-23 through 25-30](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-23) to determine whether each of the performance obligations for the installation service, software updates, and technical support are satisfied at a point in time or over time. The entity also assesses the nature of the entity's promise to transfer the software license in accordance with paragraphs [606-10-55-59 through 55-60](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-59) and [606-10-55-62 through 55-64A](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-62) (see Example 54 in paragraphs [606-10-55-362 through 55-363B](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-362)). ##### [606-10-55-146](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-146) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:ab88011012e64c4ab71c5aa7d5c88fd75d27d1c7992023ce1d8d7416cefd3f95 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The promised goods and services are the same as in Case A, except that the contract specifies that, as part of the installation service, the software is to be substantially customized to add significant new functionality to enable the software to interface with other customized software applications used by the customer. The customized installation service can be provided by other entities. ##### [606-10-55-147](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-147) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:ecdcc834a0dfe49ed78ca30e51f7a198bcf9bbfb79e5fc14d523b5651592a872 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The entity assesses the goods and services promised to the customer to determine which goods and services are distinct in accordance with paragraph [606-10-25-19](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-19). The entity first assesses whether the criterion in paragraph [606-10-25-19(a)](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-19) has been met. For the same reasons as in Case A, the entity determines that the software license, installation, software updates, and technical support each meet that criterion. The entity next assesses whether the criterion in paragraph [606-10-25-19(b)](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-19) has been met by evaluating the principle and the factors in paragraph [606-10-25-21](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-21).The entity observes that the terms of the contract result in a promise to provide a significant service of integrating the licensed software into the existing software system by performing a customized installation service as specified in the contract. In other words, the entity is using the license and the customized installation service as inputs to produce the combined output (that is, a functional and integrated software system) specified in the contract (see paragraph [606-10-25-21(a)](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-21)). The software is significantly modified and customized by the service (see paragraph [606-10-25-21(b)](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-21)). Consequently, the entity determines that the promise to transfer the license is not separately identifiable from the customized installation service and, therefore, the criterion in paragraph [606-10-25-19(b)](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-19) is not met. Thus, the software license and the customized installation service are not distinct. ##### [606-10-55-148](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-148) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:93ec29f099acf0f303d60ddf6e81c7ead83ae98c86c7018ec1ad6f97286e6d3e Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. On the basis of the same analysis as in Case A, the entity concludes that the software updates and technical support are distinct from the other promises in the contract. ##### [606-10-55-149](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-149) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:f767cd713c4a9b4f4d9995935947576114f7d07cdc0f22ca55c1bd331fabcf69 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. On the basis of this assessment, the entity identifies three performance obligations in the contract for the following goods or services: 1. a Software customization which is comprised of the license to the software and the customized installation service 2. b Software updates 3. c Technical support. ##### [606-10-55-150](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-150) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:a0811748f97efd9edca0b7cce9b3c3871beaf782df28df561c83f893bdf6e3b9 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The entity applies paragraphs [606-10-25-23 through 25-30](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-23) to determine whether each performance obligation is satisfied at a point in time or over time and paragraphs [606-10-25-31 through 25-37](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-31) to measure progress toward complete satisfaction of those performance obligations determined to be satisfied over time. In applying those paragraphs to the software customization, the entity considers that the customized software to which the customer will have rights is functional intellectual property and that the functionality of that software will not change during the license period as a result of activities that do not transfer a good or service to the customer. Therefore, the entity is providing a right to use the customized software. Consequently, the software customization performance obligation is completely satisfied upon completion of the customized installation service. The entity considers the other specific facts and circumstances of the contract in the context of the guidance in paragraphs [606-10-25-23 through 25-30](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-23) in determining whether it should recognize revenue related to the single software customization performance obligation as it performs the customized installation service or at the point in time the customized software is transferred to the customer. ##### [606-10-55-150A](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-150A) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:ea2a3ba1434140b43c2e9f6bca6315a6624a9cc00d59ee90c63372d93b124ff8 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An entity contracts with a customer to sell a piece of equipment and installation services. The equipment is operational without any customization or modification. The installation required is not complex and is capable of being performed by several alternative service providers. ##### [606-10-55-150B](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-150B) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:8e080819cec924dbf2657889119cf19d271a99b2cd55b344e6cd36cb7de6bd5c Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The entity identifies two promised goods and services in the contract: (a) equipment and (b) installation. The entity assesses the criteria in paragraph [606-10-25-19](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-19) to determine whether each promised good or service is distinct. The entity determines that the equipment and the installation each meet the criterion in paragraph [606-10-25-19(a)](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-19). The customer can benefit from the equipment on its own, by using it or reselling it for an amount greater than scrap value, or together with other readily available resources (for example, installation services available from alternative providers). The customer also can benefit from the installation services together with other resources that the customer will already have obtained from the entity (that is, the equipment). ##### [606-10-55-150C](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-150C) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:e8c5f581f7193268717253d12204615bb0dc70187cadf95f34f869e7815e1ebd Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The entity further determines that its promises to transfer the equipment and to provide the installation services are each separately identifiable (in accordance with paragraph [606-10-25-19(b)](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-19)). The entity considers the principle and the factors in paragraph [606-10-25-21](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-21) in determining that the equipment and the installation services are not inputs to a combined item in this contract. In this Case, each of the factors in paragraph [606-10-25-21](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-21) contributes to, but is not individually determinative of, the conclusion that the equipment and the installation services are separately identifiable as follows: 1. a The entity is not providing a significant integration service. That is, the entity has promised to deliver the equipment and then install it; the entity would be able to fulfill its promise to transfer the equipment separately from its promise to subsequently install it. The entity has not promised to combine the equipment and the installation services in a way that would transform them into a combined output. 2. b The entity's installation services will not significantly customize or significantly modify the equipment. 3. c Although the customer can benefit from the installation services only after it has obtained control of the equipment, the installation services do not significantly affect the equipment because the entity would be able to fulfill its promise to transfer the equipment independently of its promise to provide the installation services. Because the equipment and the installation services do not each significantly affect the other, they are not highly interdependent or highly interrelated. On the basis of this assessment, the entity identifies two performance obligations (the equipment and installation services) in the contract. ##### [606-10-55-150D](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-150D) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:e52232ba46a49f0593ebfbfa882e9d4933a0e2312f698c5243fc1239649d96cb Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The entity applies paragraphs [606-10-25-23 through 25-30](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-23) to determine whether each performance obligation is satisfied at a point in time or over time. ##### [606-10-55-150E](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-150E) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:ca92e29db896c86c8ec1847a6d555421bbb9171103696fee4e7619e1956b3603 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Assume the same facts as in Case C, except that the customer is contractually required to use the entity's installation services. ##### [606-10-55-150F](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-150F) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:cb07a75413937c32c0b8fea28fac69fe21815177dc17b83d4d421c96f070c74b Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The contractual requirement to use the entity's installation services does not change the evaluation of whether the promised goods and services are distinct in this Case. This is because the contractual requirement to use the entity's installation services does not change the characteristics of the goods or services themselves, nor does it change the entity's promises to the customer. Although the customer is required to use the entity's installation services, the equipment and the installation services are capable of being distinct (that is, they each meet the criterion in paragraph [606-10-25-19(a)](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-19)), and the entity's promises to provide the equipment and to provide the installation services are each separately identifiable (that is, they each meet the criterion in paragraph [606-10-25-19(b)](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-19)). The entity's analysis in this regard is consistent with Case C. ##### [606-10-55-150G](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-150G) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:1211714f7747d71476a1abe2b39d79d3ea4e1a24e3a9f0fdf046d39bd37ad3cf Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An entity enters into a contract with a customer to provide a piece of off-the-shelf equipment (that is, it is operational without any significant customization or modification) and to provide specialized consumables for use in the equipment at predetermined intervals over the next three years. The consumables are produced only by the entity, but are sold separately by the entity. ##### [606-10-55-150H](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-150H) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:3fe82d893944ab52bb08c0a7dbee0e21c5f9ab0734aba6db9b48739103226b44 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The entity determines that the customer can benefit from the equipment together with the readily available consumables. The consumables are readily available in accordance with paragraph [606-10-25-20](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-20) because they are regularly sold separately by the entity (that is, through refill orders to customers that previously purchased the equipment). The customer can benefit from the consumables that will be delivered under the contract together with the delivered equipment that is transferred to the customer initially under the contract. Therefore, the equipment and the consumables are each capable of being distinct in accordance with paragraph [606-10-25-19(a)](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-19). ##### [606-10-55-150I](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-150I) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:10f4fe76472fc3e89f7dd3cea8dd472c5d0970ee2b9f5b52ff12f7bf83b49310 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The entity determines that its promises to transfer the equipment and to provide consumables over a three-year period are each separately identifiable in accordance with paragraph [606-10-25-19(b)](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-19). In determining that the equipment and the consumables are not inputs to a combined item in this contract, the entity considers that it is not providing a significant integration service that transforms the equipment and consumables into a combined output. Additionally, neither the equipment nor the consumables are significantly customized or modified by the other. Lastly, the entity concludes that the equipment and the consumables are not highly interdependent or highly interrelated because they do not significantly affect each other. Although the customer can benefit from the consumables in this contract only after it has obtained control of the equipment (that is, the consumables would have no use without the equipment) and the consumables are required for the equipment to function, the equipment and the consumables do not each significantly affect the other. This is because the entity would be able to fulfill each of its promises in the contract independently of the other. That is, the entity would be able to fulfill its promise to transfer the equipment even if the customer did not purchase any consumables and would be able to fulfill its promise to provide the consumables even if the customer acquired the equipment separately. ##### [606-10-55-150J](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-150J) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:586d213fb0fa0d436c61d96d4e26c64605927b84298a77fa7c894e366c926b0e Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. On the basis of this assessment, the entity identifies two performance obligations in the contract for the following goods or services: 1. a The equipment 2. b The consumables. ##### [606-10-55-150K](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-150K) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:81c129112ff0f7d123bee39cb4de742f71136ddc4295cf98ec0f47da469f88da Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The entity applies paragraphs [606-10-25-23 through 25-30](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-23) to determine whether each performance obligation is satisfied at a point in time or over time. ##### [606-10-55-151](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-151) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:67a7e54ca760c29e3e0e0ab7a625d12b47efeb725cb2834af41d4be04b78035a Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An entity, a manufacturer, sells a product to a distributor (that is, its customer), who will then resell it to an end customer. ##### [606-10-55-152](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-152) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:d7d9c3a526e239712d4ffeb798410b1d7a11ca99d425956da16a1c301928ea4d Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. In the contract with the distributor, the entity promises to provide maintenance services for no additional consideration (that is, “free”) to any party (that is, the end customer) that purchases the product from the distributor. The entity outsources the performance of the maintenance services to the distributor and pays the distributor an agreed-upon amount for providing those services on the entity's behalf. If the end customer does not use the maintenance services, the entity is not obliged to pay the distributor. ##### [606-10-55-153](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-153) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:c2c84f5ef336982c54cb5a83948dab8e5a804bbc5032bf33bd2efefe8eaa16c9 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The contract with the customer includes two promised goods or services—(a) the product and (b) the maintenance services (because the promise of maintenance services is a promise to transfer goods or services in the future and is part of the negotiated exchange between the entity and the distributor). The entity assesses whether each good or service is distinct in accordance with paragraph [606-10-25-19](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-19). The entity determines that both the product and the maintenance services meet the criterion in paragraph [606-10-25-19(a)](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-19). The entity regularly sells the product on a standalone basis, which indicates that the customer can benefit from the product on its own. The customer can benefit from the maintenance services together with a resource the customer already has obtained from the entity (that is, the product). ##### [606-10-55-153A](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-153A) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:6e6550b82bb6538fa9a5887f707a9bdf7d928a7518cd60d0ca5144c4f60ef78d Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The entity further determines that its promises to transfer the product and to provide the maintenance services are separately identifiable (in accordance with paragraph [606-10-25-19(b)](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-19)) on the basis of the principle and the factors in paragraph [606-10-25-21](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-21). The product and the maintenance services are not inputs to a combined item in this contract. The entity is not providing a significant integration service because the presence of the product and the services together in this contract do not result in any additional or combined functionality. In addition, neither the product nor the services modify or customize the other. Lastly, the product and the maintenance services are not highly interdependent or highly interrelated because the entity would be able to satisfy each of the promises in the contract independent of its efforts to satisfy the other (that is, the entity would be able to transfer the product even if the customer declined maintenance services and would be able to provide maintenance services in relation to products sold previously through other distributors). The entity also observes, in applying the principle in paragraph [606-10-25-21](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-21), that the entity's promise to provide maintenance is not necessary for the product to continue to provide significant benefit to the customer. Consequently, the entity allocates a portion of the transaction price to each of the two performance obligations (that is, the product and the maintenance services) in the contract. ##### [606-10-55-154](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-154) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:1ef3a98ae579c4a2726674b844afacf09a7adf26ce72716a6c1023a083f0d021 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The entity has historically provided maintenance services for no additional consideration (that is, “free”) to end customers that purchase the entity's product from the distributor. The entity does not explicitly promise maintenance services during negotiations with the distributor, and the final contract between the entity and the distributor does not specify terms or conditions for those services. ##### [606-10-55-155](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-155) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:286d27fd50a121a71a61c05f00847e260531184697b5b762132ab3077a89f01f Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. However, on the basis of its customary business practice, the entity determines at contract inception that it has made an implicit promise to provide maintenance services as part of the negotiated exchange with the distributor. That is, the entity's past practices of providing these services create reasonable expectations of the entity's customers (that is, the distributor and end customers) in accordance with paragraph [606-10-25-16](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-16). Consequently, the entity assesses whether the promise of maintenance services is a performance obligation. For the same reasons as in Case A, the entity determines that the product and maintenance services are separate performance obligations. ##### [606-10-55-156](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-156) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:c9beae28c6b1921e6667caf02769fe2a99df4b7ad8a0c39f86975fb8458cd71d Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. In the contract with the distributor, the entity does not promise to provide any maintenance services. In addition, the entity typically does not provide maintenance services, and, therefore, the entity's customary business practices, published policies, and specific statements at the time of entering into the contract have not created an implicit promise to provide goods or services to its customers. The entity transfers control of the product to the distributor and, therefore, the contract is completed. However, before the sale to the end customer, the entity makes an offer to provide maintenance services to any party that purchases the product from the distributor for no additional promised consideration. ##### [606-10-55-157](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-157) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:fae790091411107ca7f9bc440f515a41db68dc07ab3244d09f3e98e73f54b309 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The promise of maintenance is not included in the contract between the entity and the distributor at contract inception. That is, in accordance with paragraph [606-10-25-16](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-16), the entity does not explicitly or implicitly promise to provide maintenance services to the distributor or the end customers. Consequently, the entity does not identify the promise to provide maintenance services as a performance obligation. Instead, the obligation to provide maintenance services is accounted for in accordance with Topic 450 on contingencies. ##### [606-10-55-157A](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-157A) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:8ff473ea4afb1b11e1067be5eb34705505665f8950c848055ad11c923d0090b2 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Although the maintenance services are not a promised service in the current contract, in future contracts with customers the entity would assess whether it has created a business practice resulting in an implied promise to provide maintenance services. ##### [606-10-55-157B](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-157B) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:7f6110f1c2275fb027096d4a9296343305d97dfff41af9a9f1a70ac1b3baf0fe Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An entity, a hotel manager, enters into a contract with a customer to manage a customer-owned property for 20 years. The entity receives consideration monthly that is equal to 1 percent of the revenue from the customer-owned property. ##### [606-10-55-157C](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-157C) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:850191194ff5d6c0a784456d5689d3927bd2719bf6368ed74ec002edb60e4ef9 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The entity evaluates the nature of its promise to the customer in this contract and determines that its promise is to provide a hotel management service. The service comprises various activities that may vary each day (for example, cleaning services, reservation services, and property maintenance). However, those tasks are activities to fulfill the hotel management service and are not separate promises in the contract. The entity determines that each increment of the promised service (for example, each day of the management service) is distinct in accordance with paragraph [606-10-25-19](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-19). This is because the customer can benefit from each increment of service on its own (that is, it is capable of being distinct) and each increment of service is separately identifiable because no day of service significantly modifies or customizes another and no day of service significantly affects either the entity's ability to fulfill another day of service or the benefit to the customer of another day of service. ##### [606-10-55-157D](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-157D) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:961dae83705920fb7b633733bc665c46c93e3700d9394987aaed54699521d00e Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The entity also evaluates whether it is providing a series of distinct goods or services in accordance with paragraphs [606-10-25-14 through 25-15](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-14) . First, the entity determines that the services provided each day are substantially the same. This is because the nature of the entity's promise is the same each day and the entity is providing the same overall management service each day (although the underlying tasks or activities the entity performs to provide that service may vary from day to day). The entity then determines that the services have the same pattern of transfer to the customer because both criteria in paragraph [606-10-25-15](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-15) are met. The entity determines that the criterion in paragraph [606-10-25-15(a)](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-15) is met because each distinct service meets the criteria in paragraph [606-10-25-27](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-27) to be a performance obligation satisfied over time. The customer simultaneously receives and consumes the benefits provided by the entity as it performs. The entity determines that the criterion in paragraph [606-10-25-15(b)](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-15) also is met because the same measure of progress (in this case, a time-based output method) would be used to measure the entity's progress toward satisfying its promise to provide the hotel management service each day. ##### [606-10-55-157E](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-157E) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:8eef9ddf90497792960ec3f2d9bfcbf3fa1515d90fdc254847ce638d11ac8792 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. After determining that the entity is providing a series of distinct daily hotel management services over the 20-year management period, the entity next determines the transaction price. The entity determines that the entire amount of the consideration is variable consideration. The entity considers whether the variable consideration may be allocated to one or more, but not all, of the distinct days of service in the series in accordance with paragraph [606-10-32-39(b)](https://asc.understandingaccounting.org/asc/606/10/#606-10-32-39). The entity evaluates the criteria in paragraph [606-10-32-40](https://asc.understandingaccounting.org/asc/606/10/#606-10-32-40) and determines that the terms of the variable consideration relate specifically to the entity's efforts to transfer each distinct daily service and that allocation of the variable consideration earned based on the activities performed by the entity each day to the distinct day in which those activities are performed is consistent with the overall allocation objective. Therefore, as each distinct daily service is completed, the variable consideration allocated to that period may be recognized, subject to the constraint on variable consideration. ##### [606-10-55-158](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-158) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:20c29389f470060c067847bb26c44ed9f897f8266c5b052879cb361a38bea4d8 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Examples 13-17 illustrate the guidance in paragraphs [606-10-25-27 through 25-29](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-27) and [606-10-55-4 through 55-15](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-4) on performance obligations satisfied over time. In addition, the following guidance is illustrated in these Examples: 1. a Paragraphs [606-10-25-27(a)](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-27) and [606-10-55-5 through 55-6](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-5) on when a customer simultaneously receives and consumes the benefits provided by the entity's performance as the entity performs (Examples 13 and 14) 2. b Paragraphs [606-10-25-27(c)](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-27) and [606-10-25-28 through 25-29](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-28) and [606-10-55-8 through 55-15](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-8) on an entity's performance that does not create an asset with an alternative use and an entity's enforceable right to payment for performance completed to date (Examples 14-17) 3. c Paragraph [606-10-25-30](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-30) on performance obligations satisfied at a point in time (Example 17). ##### [606-10-55-159](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-159) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:695d5fe8cc539f509a1b7f0ae0d660f011455ba905e0684fd0b399dedc535285 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An entity enters into a contract to provide monthly payroll processing services to a customer for one year. ##### [606-10-55-160](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-160) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:21ea2aaab0da503f42fd31cd757c75753792a0c8d4292729a6b43e2c61057df0 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The promised payroll processing services are accounted for as a single performance obligation in accordance with paragraph [606-10-25-14(b)](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-14). The performance obligation is satisfied over time in accordance with paragraph [606-10-25-27(a)](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-27) because the customer simultaneously receives and consumes the benefits of the entity's performance in processing each payroll transaction as and when each transaction is processed. The fact that another entity would not need to reperform payroll processing services for the service that the entity has provided to date also demonstrates that the customer simultaneously receives and consumes the benefits of the entity's performance as the entity performs. (The entity disregards any practical limitations on transferring the remaining performance obligation, including setup activities that would need to be undertaken by another entity.) The entity recognizes revenue over time by measuring its progress toward complete satisfaction of that performance obligation in accordance with paragraphs [606-10-25-31 through 25-37](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-31) and [606-10-55-16 through 55-21](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-16) . ##### [606-10-55-161](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-161) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:0a77ad9c4a0752a2fb44e9c8345ef380b2151d799223a3b15152131700b3183a Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An entity enters into a contract with a customer to provide a consulting service that results in the entity providing a professional opinion to the customer. The professional opinion relates to facts and circumstances that are specific to the customer. If the customer were to terminate the consulting contract for reasons other than the entity's failure to perform as promised, the contract requires the customer to compensate the entity for its costs incurred plus a 15 percent margin. The 15 percent margin approximates the profit margin that the entity earns from similar contracts. ##### [606-10-55-162](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-162) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:44e2e16476b4793c1988546f8f151daf6d7e3ef85a7df428a1f6e9a96ce0789d Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The entity considers the criterion in paragraph [606-10-25-27(a)](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-27) and the guidance in paragraphs [606-10-55-5 through 55-6](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-5) to determine whether the customer simultaneously receives and consumes the benefits of the entity's performance. If the entity were to be unable to satisfy its obligation and the customer hired another consulting firm to provide the opinion, the other consulting firm would need to substantially reperform the work that the entity had completed to date because the other consulting firm would not have the benefit of any work in progress performed by the entity. The nature of the professional opinion is such that the customer will receive the benefits of the entity's performance only when the customer receives the professional opinion. Consequently, the entity concludes that the criterion in paragraph [606-10-25-27(a)](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-27) is not met. ##### [606-10-55-163](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-163) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:022580d94870849c210c6f9c8747e87cd2fa20065deca707bb7bb5a64591f420 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. However, the entity's performance obligation meets the criterion in paragraph [606-10-25-27(c)](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-27) and is a performance obligation satisfied over time because of both of the following factors: 1. a In accordance with paragraphs [606-10-25-28](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-28) and [606-10-55-8 through 55-10](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-8) , the development of the professional opinion does not create an asset with alternative use to the entity because the professional opinion relates to facts and circumstances that are specific to the customer. Therefore, there is a practical limitation on the entity's ability to readily direct the asset to another customer. 2. b In accordance with paragraphs [606-10-25-29](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-29) and [606-10-55-11 through 55-15](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-11) , the entity has an enforceable right to payment for its performance completed to date for its costs plus a reasonable margin, which approximates the profit margin in other contracts. ##### [606-10-55-164](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-164) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:8de8b67480e1251439395d244c632bbaf178a2be675d5b53f8bddc61b4da6dea Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Consequently, the entity recognizes revenue over time by measuring the progress toward complete satisfaction of the performance obligation in accordance with paragraphs [606-10-25-31 through 25-37](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-31) and [606-10-55-16 through 55-21](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-16) . ##### [606-10-55-165](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-165) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:653433ce3c5a7a51487aad8031243c52dcf9687af01bd1156e90b2ac610fa525 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An entity enters into a contract with a customer, a government agency, to build a specialized satellite. The entity builds satellites for various customers, such as governments and commercial entities. The design and construction of each satellite differ substantially, on the basis of each customer's needs and the type of technology that is incorporated into the satellite. ##### [606-10-55-166](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-166) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:fbf5785de8951fd50068ea3430fb683411ae0f737bcbd1fb48c733f3af2d3313 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. At contract inception, the entity assesses whether its performance obligation to build the satellite is a performance obligation satisfied over time in accordance with paragraph [606-10-25-27](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-27). ##### [606-10-55-167](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-167) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:dbc1fc723afa28a10e4b4842bbaeabb699971fa625e05406845dd294e97bf131 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. As part of that assessment, the entity considers whether the satellite in its completed state will have an alternative use to the entity. Although the contract does not preclude the entity from directing the completed satellite to another customer, the entity would incur significant costs to rework the design and function of the satellite to direct that asset to another customer. Consequently, the asset has no alternative use to the entity (see paragraphs [606-10-25-27(c)](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-27), [606-10-25-28](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-28), and [606-10-55-8 through 55-10](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-8) ) because the customer-specific design of the satellite limits the entity's practical ability to readily direct the satellite to another customer. ##### [606-10-55-168](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-168) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:5b2fe8bd602d157821feb85796f6b8d325a67ac1d963cba7b9474491ec88f48e Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. For the entity's performance obligation to be satisfied over time when building the satellite, paragraph [606-10-25-27(c)](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-27) also requires the entity to have an enforceable right to payment for performance completed to date. This condition is not illustrated in this Example. ##### [606-10-55-169](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-169) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:f227594a7faa4109c1d190ac36fc289bb1b726b0b88d5c5b589ec9697d682e30 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An entity enters into a contract with a customer to build an item of equipment. The payment schedule in the contract specifies that the customer must make an advance payment at contract inception of 10 percent of the contract price, regular payments throughout the construction period (amounting to 50 percent of the contract price), and a final payment of 40 percent of the contract price after construction is completed and the equipment has passed the prescribed performance tests. The payments are nonrefundable unless the entity fails to perform as promised. If the customer terminates the contract, the entity is entitled only to retain any progress payments received from the customer. The entity has no further rights to compensation from the customer. ##### [606-10-55-170](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-170) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:fe96946902efab8d6bd4d9ef543ed68d0d72748ccda2086520af72baf8d52d66 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. At contract inception, the entity assesses whether its performance obligation to build the equipment is a performance obligation satisfied over time in accordance with paragraph [606-10-25-27](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-27). ##### [606-10-55-171](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-171) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:ed5892874fe294ca1b7941a3f0537240dd27ac5a3572ae8e9e138d24329f3441 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. As part of that assessment, the entity considers whether it has an enforceable right to payment for performance completed to date in accordance with paragraphs [606-10-25-27(c)](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-27), [606-10-25-29](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-29), and [606-10-55-11 through 55-15](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-11) if the customer were to terminate the contract for reasons other than the entity's failure to perform as promised. Even though the payments made by the customer are nonrefundable, the cumulative amount of those payments is not expected, at all times throughout the contract, to at least correspond to the amount that would be necessary to compensate the entity for performance completed to date. This is because at various times during construction the cumulative amount of consideration paid by the customer might be less than the selling price of the partially completed item of equipment at that time. Consequently, the entity does not have a right to payment for performance completed to date. ##### [606-10-55-172](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-172) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:f11d2f6ce03f834e71afb3eda459b6992a3e734ea476fbd0fa186bcd5f232c89 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Because the entity does not have a right to payment for performance completed to date, the entity's performance obligation is not satisfied over time in accordance with paragraph [606-10-25-27(c)](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-27). Accordingly, the entity does not need to assess whether the equipment would have an alternative use to the entity. The entity also concludes that it does not meet the criteria in paragraph [606-10-25-27(a) or (b)](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-27), and, thus, the entity accounts for the construction of the equipment as a performance obligation satisfied at a point in time in accordance with paragraph [606-10-25-30](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-30). ##### [606-10-55-173](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-173) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:75a9eaee9b17d47c0d50b7ab96915a8fe31b28d4808a7d810b78e79273db8aff Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An entity is developing a multi-unit residential complex. A customer enters into a binding sales contract with the entity for a specified unit that is under construction. Each unit has a similar floor plan and is of a similar size, but other attributes of the units are different (for example, the location of the unit within the complex). ##### [606-10-55-174](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-174) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:97814995698c7d0803ddd37d479708222fd388a9c3e534e773b2046ad3a3ce04 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The customer pays a deposit upon entering into the contract, and the deposit is refundable only if the entity fails to complete construction of the unit in accordance with the contract. The remainder of the contract price is payable on completion of the contract when the customer obtains physical possession of the unit. If the customer defaults on the contract before completion of the unit, the entity only has the right to retain the deposit. ##### [606-10-55-175](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-175) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:2b6782f79f15bcfcd1c00a678c7e64c7d6f9b7aab223ea474fc7b32f883163b4 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. At contract inception, the entity applies paragraph [606-10-25-27(c)](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-27) to determine whether its promise to construct and transfer the unit to the customer is a performance obligation satisfied over time. The entity determines that it does not have an enforceable right to payment for performance completed to date because until construction of the unit is complete, the entity only has a right to the deposit paid by the customer. Because the entity does not have a right to payment for work completed to date, the entity's performance obligation is not a performance obligation satisfied over time in accordance with paragraph [606-10-25-27(c)](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-27). Instead, the entity accounts for the sale of the unit as a performance obligation satisfied at a point in time in accordance with paragraph [606-10-25-30](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-30). ##### [606-10-55-176](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-176) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:8aff722747a046a9de6a7db68cfd76a626a362ab0e5389b7a56709d247cac52f Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The customer pays a nonrefundable deposit upon entering into the contract and will make progress payments during construction of the unit. The contract has substantive terms that preclude the entity from being able to direct the unit to another customer. In addition, the customer does not have the right to terminate the contract unless the entity fails to perform as promised. If the customer defaults on its obligations by failing to make the promised progress payments as and when they are due, the entity would have a right to all of the consideration promised in the contract if it completes the construction of the unit. The courts have previously upheld similar rights that entitle developers to require the customer to perform, subject to the entity meeting its obligations under the contract. ##### [606-10-55-177](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-177) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:094922663fa9eb356c30eee5997a87d274d733d3a68c1c772a09f3bb6dfc9d30 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. At contract inception, the entity applies paragraph [606-10-25-27(c)](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-27) to determine whether its promise to construct and transfer the unit to the customer is a performance obligation satisfied over time. The entity determines that the asset (unit) created by the entity's performance does not have an alternative use to the entity because the contract precludes the entity from transferring the specified unit to another customer. The entity does not consider the possibility of a contract termination in assessing whether the entity is able to direct the asset to another customer. ##### [606-10-55-178](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-178) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:3d6af10229e18b2e0ea2b04253f44dd45c0c50f4c9e8ff4f4246a9c5e5c6c162 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The entity also has a right to payment for performance completed to date in accordance with paragraphs [606-10-25-29](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-29) and [606-10-55-11 through 55-15](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-11) . This is because if the customer were to default on its obligations, the entity would have an enforceable right to all of the consideration promised under the contract if it continues to perform as promised. ##### [606-10-55-179](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-179) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:c15c4023dd618f36eb921ef76122c32599638dbc6386ac9ae7e10ab94578b06e Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Therefore, the terms of the contract and the practices in the legal jurisdiction indicate that there is a right to payment for performance completed to date. Consequently, the criteria in paragraph [606-10-25-27(c)](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-27) are met, and the entity has a performance obligation that it satisfies over time. To recognize revenue for that performance obligation satisfied over time, the entity measures its progress toward complete satisfaction of its performance obligation in accordance with paragraphs [606-10-25-31 through 25-37](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-31) and [606-10-55-16 through 55-21](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-16) . ##### [606-10-55-180](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-180) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:8de9b9e9c08a3e87db46e6fb5e5b40dfccd9a0e2c357c62e913c18d9f7da313a Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. In the construction of a multi-unit residential complex, the entity may have many contracts with individual customers for the construction of individual units within the complex. The entity would account for each contract separately. However, depending on the nature of the construction, the entity's performance in undertaking the initial construction works (that is, the foundation and the basic structure), as well as the construction of common areas, may need to be reflected when measuring its progress toward complete satisfaction of its performance obligations in each contract. ##### [606-10-55-181](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-181) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:e9e0b32115d6999655a2a2348787f040d8d44a52aa4b0a078664ab095be0b827 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The same facts as in Case B apply to Case C, except that in the event of a default by the customer, either the entity can require the customer to perform as required under the contract or the entity can cancel the contract in exchange for the asset under construction and an entitlement to a penalty of a proportion of the contract price. ##### [606-10-55-182](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-182) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:35924ed32ce98833f1d7159176636e0d3875a731b2bbd1ce3a07cabb8864dc01 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Notwithstanding that the entity could cancel the contract (in which case the customer's obligation to the entity would be limited to transferring control of the partially completed asset to the entity and paying the penalty prescribed), the entity has a right to payment for performance completed to date because the entity also could choose to enforce its rights to full payment under the contract. The fact that the entity may choose to cancel the contract in the event the customer defaults on its obligations would not affect that assessment (see paragraph [606-10-55-13](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-13)), provided that the entity's rights to require the customer to continue to perform as required under the contract (that is, pay the promised consideration) are enforceable. ##### [606-10-55-183](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-183) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:6d66fc1cacd0a2c6d5dd5161ee2fc9c93eefaf1ad31b767f06bbeeb7295e9b98 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Examples 18 and 19 illustrate the guidance in paragraphs [606-10-25-31 through 25-37](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-31) on measuring progress toward complete satisfaction of a performance obligation satisfied over time. Example 19 also illustrates the guidance in paragraph [606-10-55-21](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-21) on uninstalled materials when costs incurred are not proportionate to the entity's progress in satisfying a performance obligation. ##### [606-10-55-184](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-184) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:c12c612a095e0386a14b1511c7843a3adb6dc28d5d8b768a1dd3fd46121245ef Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An entity, an owner and manager of health clubs, enters into a contract with a customer for one year of access to any of its health clubs. The customer has unlimited use of the health clubs and promises to pay $100 per month. ##### [606-10-55-185](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-185) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:a5e5a6bcce5e783029b65377298d38c67898b5bf31dbd211123d2b02f37e4772 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The entity determines that its promise to the customer is to provide a service of making the health clubs available for the customer to use as and when the customer wishes. This is because the extent to which the customer uses the health clubs does not affect the amount of the remaining goods and services to which the customer is entitled. The entity concludes that the customer simultaneously receives and consumes the benefits of the entity's performance as it performs by making the health clubs available. Consequently, the entity's performance obligation is satisfied over time in accordance with paragraph [606-10-25-27(a)](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-27). ##### [606-10-55-186](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-186) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:05cc5245e49134d472644859364ba7b4a85e491a92696b9371c59a8e0109093e Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The entity also determines that the customer benefits from the entity's service of making the health clubs available evenly throughout the year. (That is, the customer benefits from having the health clubs available, regardless of whether the customer uses it or not.) Consequently, the entity concludes that the best measure of progress toward complete satisfaction of the performance obligation over time is a time-based measure, and it recognizes revenue on a straight-line basis throughout the year at $100 per month. ##### [606-10-55-187](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-187) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:0d36590ffc3d67e3e206c8d85db557b5f815528f8f71795842ceda713d018435 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. In November 20X2, an entity contracts with a customer to refurbish a 3-story building and install new elevators for total consideration of $5 million. The promised refurbishment service, including the installation of elevators, is a single performance obligation satisfied over time. Total expected costs are $4 million, including $1.5 million for the elevators. The entity determines that it acts as a principal in accordance with paragraphs [606-10-55-36 through 55-40](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-36) because it obtains control of the elevators before they are transferred to the customer. ##### [606-10-55-188](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-188) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:92e9676c32807c626910dd456173f65befdd707c398e6c116a221609c270c648 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. A summary of the transaction price and expected costs is as follows: - ![](https://asc.understandingaccounting.org/asc-img/GUID-F0B479AA-D20F-4983-81CF-65A16CB5F81D-low.gif) Transaction price " $5,000,000 " Expected costs: Elevators " 1,500,000 " Other costs " 2,500,000 " Total expected costs " $4,000,000 " ##### [606-10-55-189](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-189) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:4ddd22700cf584dbe039a313e2c7f89f0baea7de4130fcb46072134b097c455d Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The entity uses an input method based on costs incurred to measure its progress toward complete satisfaction of the performance obligation. The entity assesses whether the costs incurred to procure the elevators are proportionate to the entity's progress in satisfying the performance obligation in accordance with paragraph [606-10-55-21](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-21). The customer obtains control of the elevators when they are delivered to the site in December 20X2, although the elevators will not be installed until June 20X3. The costs to procure the elevators ($1.5 million) are significant relative to the total expected costs to completely satisfy the performance obligation ($4 million). The entity is not involved in designing or manufacturing the elevators. ##### [606-10-55-190](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-190) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:13d5e8d663d3296a076cae14dd54214e237bf817b0acf53485f9de77dd43d185 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The entity concludes that including the costs to procure the elevators in the measure of progress would overstate the extent of the entity's performance. Consequently, in accordance with paragraph [606-10-55-21](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-21), the entity adjusts its measure of progress to exclude the costs to procure the elevators from the measure of costs incurred and from the transaction price. The entity recognizes revenue for the transfer of the elevators in an amount equal to the costs to procure the elevators (that is, at a zero margin). ##### [606-10-55-191](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-191) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:c6bb18687f81629e0ac3efe3bf32227db4c208d8206ad59a55491493c3a556b6 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. As of December 31, 20X2, the entity observes that: 1. a Other costs incurred (excluding elevators) are$500,000. 2. b Performance is 20% complete (that is, $500,000 ÷ $2,500,000). ##### [606-10-55-192](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-192) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:4062c592adeb1c97bca433d0845bdc418b39024e656ecb814eacc2f75919f35d Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Consequently, at December 31, 20X2, the entity recognizes the following: - ![](https://asc.understandingaccounting.org/asc-img/GUID-EA9C04F6-A7AF-4F97-9A16-81589E4C921E-low.gif) Revenue " $2,200,000 " (a) Costs of goods sold " 2,000,000 " (b) Profit " $200,000 " (a) "Revenue recognized is calculated as (20% × $3,500,000 ) + $1,500,000. ($3,500,000 is $5,000,000 transaction price - $1,500,000 costs of elevators.)" (b) "Cost of goods sold is $500,000 of costs incurred + $1,500,000 costs of elevators." ##### [606-10-55-193](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-193) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:771bd121b0fc2b7bfdb0c5f87db353ad0fc7a27e3a7b8459a723a4b56abc0929 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Examples 20 and 21 illustrate the guidance in paragraphs [606-10-32-5 through 32-9](https://asc.understandingaccounting.org/asc/606/10/#606-10-32-5) on identifying variable consideration. ##### [606-10-55-194](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-194) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:7c40b74402a69538bf3df30e17a16e1cae82c6b36951bbb7584469e4826ea7b3 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An entity enters into a contract with a customer to build an asset for $1 million. In addition, the terms of the contract include a penalty of $100,000 if the construction is not completed within 3 months of a date specified in the contract. ##### [606-10-55-195](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-195) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:9d45d98b2c6d050246c5f3fdcaa53f24430b59362fde204b27a4fba896277b44 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The entity concludes that the consideration promised in the contract includes a fixed amount of $900,000 and a variable amount of $100,000 (arising from the penalty). ##### [606-10-55-196](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-196) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:ced722e4187de9f9ba5dd0f98bda2f61a6170cb75fab29a6dc8bf6c21912e8ff Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The entity estimates the variable consideration in accordance with paragraphs [606-10-32-5 through 32-9](https://asc.understandingaccounting.org/asc/606/10/#606-10-32-5) and considers the guidance in paragraphs [606-10-32-11 through 32-13](https://asc.understandingaccounting.org/asc/606/10/#606-10-32-11) on constraining estimates of variable consideration. ##### [606-10-55-197](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-197) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:07d0e231b7da6d724f735fff99e78c866b679cc9a64a51efc8e3ed6cb2a3808e Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An entity enters into a contract with a customer to build a customized asset. The promise to transfer the asset is a performance obligation that is satisfied over time. The promised consideration is $2.5 million, but that amount will be reduced or increased depending on the timing of completion of the asset. Specifically, for each day after March 31, 20X7 that the asset is incomplete, the promised consideration is reduced by $10,000. For each day before March 31, 20X7 that the asset is complete, the promised consideration increases by $10,000. ##### [606-10-55-198](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-198) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:f3a97c057ee6d6c63c447e30f91b223d20a1351bfb9fffa1d517ff940ca28d0f Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. In addition, upon completion of the asset, a third party will inspect the asset and assign a rating based on metrics that are defined in the contract. If the asset receives a specified rating, the entity will be entitled to an incentive bonus of $150,000. ##### [606-10-55-199](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-199) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:7d44b6a3dca8e04b40f3830057d9ca6862d1cd4f6c3785409db66ab147425b98 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. In determining the transaction price, the entity prepares a separate estimate for each element of variable consideration to which the entity will be entitled using the estimation methods described in paragraph [606-10-32-8](https://asc.understandingaccounting.org/asc/606/10/#606-10-32-8): 1. a The entity decides to use the expected value method to estimate the variable consideration associated with the daily penalty or incentive (that is, $2.5 million, plus or minus $10,000 per day). This is because it is the method that the entity expects to better predict the amount of consideration to which it will be entitled. 2. b The entity decides to use the most likely amount to estimate the variable consideration associated with the incentive bonus. This is because there are only 2 possible outcomes ($150,000 or $0) and it is the method that the entity expects to better predict the amount of consideration to which it will be entitled. ##### [606-10-55-200](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-200) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:e5ee966d7b4bdf420578284cc5ddb1273a9ae59a0d17a67eeae0800875c3bb77 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The entity considers the guidance in paragraphs [606-10-32-11 through 32-13](https://asc.understandingaccounting.org/asc/606/10/#606-10-32-11) on constraining estimates of variable consideration to determine whether the entity should include some or all of its estimate of variable consideration in the transaction price. ##### [606-10-55-201](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-201) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:3b5c7c5b17786b7853d94684815c02a3a7d9281e927b1bf327964e00c6f5b03a Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Examples 22-25 illustrate the guidance in paragraphs [606-10-32-11 through 32-13](https://asc.understandingaccounting.org/asc/606/10/#606-10-32-11) on constraining estimates of variable consideration. In addition, the following guidance is illustrated in these Examples: 1. a Paragraph [606-10-32-10](https://asc.understandingaccounting.org/asc/606/10/#606-10-32-10) on refund liabilities (Example 22) 2. b Paragraphs [606-10-55-22 through 55-29](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-22) on sales with a right of return (Example 22) 3. c Paragraphs [606-10-32-39 through 32-41](https://asc.understandingaccounting.org/asc/606/10/#606-10-32-39) on allocating variable consideration to performance obligations (Example 25). ##### [606-10-55-202](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-202) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:9423092ff8b0502fe89767cc7ac243cc198622818feff7868f916d822688cf38 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An entity enters into 100 contracts with customers. Each contract includes the sale of 1 product for $100 (100 total products × $100 = $10,000 total consideration). Cash is received when control of a product transfers. The entity's customary business practice is to allow a customer to return any unused product within 30 days and receive a full refund. The entity's cost of each product is $60. ##### [606-10-55-203](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-203) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:8b444898d926159dd92ba9621c455dec5eb5acfd7ae0191c94cc31ef7ea73d54 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The entity applies the guidance in this Topic to the portfolio of 100 contracts because it reasonably expects that, in accordance with paragraph [606-10-10-4](https://asc.understandingaccounting.org/asc/606/10/#606-10-10-4), the effects on the financial statements from applying this guidance to the portfolio would not differ materially from applying the guidance to the individual contracts within the portfolio. ##### [606-10-55-204](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-204) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:5401fb854ce9e4fb06b22c9ca474d7a09c32eddb6307d3920077fb6780ae63b6 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Because the contract allows a customer to return the products, the consideration received from the customer is variable. To estimate the variable consideration to which the entity will be entitled, the entity decides to use the expected value method (see paragraph [606-10-32-8(a)](https://asc.understandingaccounting.org/asc/606/10/#606-10-32-8)) because it is the method that the entity expects to better predict the amount of consideration to which it will be entitled. Using the expected value method, the entity estimates that 97 products will not be returned. ##### [606-10-55-205](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-205) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:326b1116b5c771a053486ce81abdad19d4ebea88920b5c9f6122a24c27d95e21 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The entity also considers the guidance in paragraphs [606-10-32-11 through 32-13](https://asc.understandingaccounting.org/asc/606/10/#606-10-32-11) on constraining estimates of variable consideration to determine whether the estimated amount of variable consideration of $9,700 ($100 × 97 products not expected to be returned) can be included in the transaction price. The entity considers the factors in paragraph [606-10-32-12](https://asc.understandingaccounting.org/asc/606/10/#606-10-32-12) and determines that although the returns are outside the entity's influence, it has significant experience in estimating returns for this product and customer class. In addition, the uncertainty will be resolved within a short time frame (that is, the 30-day return period). Thus, the entity concludes that it is probable that a significant reversal in the cumulative amount of revenue recognized (that is, $9,700) will not occur as the uncertainty is resolved (that is, over the return period). ##### [606-10-55-206](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-206) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:23bafd8319b22e164259b4f5f3eefba0b5b04fb801d656d30fef58bfd4b36149 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The entity estimates that the costs of recovering the products will be immaterial and expects that the returned products can be resold at a profit. ##### [606-10-55-207](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-207) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:5a35b89af64107d383a6e5245fd462f4682aa7d16e7c5c9093b4447024141448 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Upon transfer of control of the 100 products, the entity does not recognize revenue for the 3 products that it expects to be returned. Consequently, in accordance with paragraphs [606-10-32-10](https://asc.understandingaccounting.org/asc/606/10/#606-10-32-10) and [606-10-55-23](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-23), the entity recognizes the following: - ![](https://asc.understandingaccounting.org/asc-img/GUID-F442E0D3-979D-40AB-99C3-84CC90D6817C-low.gif) Cash "$10,000 ($100 × 100 products transferred)" Revenue "$9,700 ($100 × 97 products not expected to be returned)" Refund liability $300 ($100 refund × 3 products expected to be returned) Cost of sales "$5,820 ($60 × 97 products not expected to be returned)" Asset $180 ($60 × 3 products for its right to recover products from customers on settling the refund liability) Inventory "$6,000 ($60 × 100 products)" ##### [606-10-55-208](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-208) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:cff3c9b7bd91f9e12cfe43f1826d2e9be120197e2386c68614479929f1bb5fe3 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An entity enters into a contract with a customer, a distributor, on December 1, 20X7. The entity transfers 1,000 products at contract inception for a price stated in the contract of $100 per product (total consideration is $100,000). Payment from the customer is due when the customer sells the products to the end customers. The entity's customer generally sells the products within 90 days of obtaining them. Control of the products transfers to the customer on December 1, 20X7. ##### [606-10-55-209](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-209) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:4cbfb65de4d6f1ca49e68f9ff30a38b180bf4e2c8d7b250aac2767f5280cd64b Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. On the basis of its past practices and to maintain its relationship with the customer, the entity anticipates granting a price concession to its customer because this will enable the customer to discount the product and thereby move the product through the distribution chain. Consequently, the consideration in the contract is variable. ##### [606-10-55-210](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-210) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:e7ad6f6fc8b2085c2e709af6bd40d10c5cc58d4c315b6aaf535ef2828f23e931 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The entity has significant experience selling this and similar products. The observable data indicate that historically the entity grants a price concession of approximately 20 percent of the sales price for these products. Current market information suggests that a 20 percent reduction in price will be sufficient to move the products through the distribution chain. The entity has not granted a price concession significantly greater than 20 percent in many years. ##### [606-10-55-211](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-211) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:bd209a3a445c8f3aa674de897267db82283050b1616679bd7c233453029ae01c Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. To estimate the variable consideration to which the entity will be entitled, the entity decides to use the expected value method (see paragraph [606-10-32-8(a)](https://asc.understandingaccounting.org/asc/606/10/#606-10-32-8)) because it is the method that the entity expects to better predict the amount of consideration to which it will be entitled. Using the expected value method, the entity estimates the transaction price to be $80,000 ($80 × 1,000 products). ##### [606-10-55-212](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-212) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:f62e19230c2b126ab521528a4e9ee13e5fc2456b2d01bd9e1bad6fa1310a8fff Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The entity also considers the guidance in paragraphs [606-10-32-11 through 32-13](https://asc.understandingaccounting.org/asc/606/10/#606-10-32-11) on constraining estimates of variable consideration to determine whether the estimated amount of variable consideration of $80,000 can be included in the transaction price. The entity considers the factors in paragraph [606-10-32-12](https://asc.understandingaccounting.org/asc/606/10/#606-10-32-12) and determines that it has significant previous experience with this product and current market information that supports its estimate. In addition, despite some uncertainty resulting from factors outside its influence, based on its current market estimates, the entity expects the price to be resolved within a short time frame. Thus, the entity concludes that it is probable that a significant reversal in the cumulative amount of revenue recognized (that is, $80,000) will not occur when the uncertainty is resolved (that is, when the total amount of price concessions is determined). Consequently, the entity recognizes $80,000 as revenue when the products are transferred on December 1, 20X7. ##### [606-10-55-213](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-213) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:39db4b1f844cd87da982a7eeb65c33ee6a54968cedb3678aba7e52ed1d81dfc9 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The entity has experience selling similar products. However, the entity's products have a high risk of obsolescence, and the entity is experiencing high volatility in the pricing of its products. The observable data indicate that historically the entity grants a broad range of price concessions ranging from 20 to 60 percent of the sales price for similar products. Current market information also suggests that a 15 to 50 percent reduction in price may be necessary to move the products through the distribution chain. ##### [606-10-55-214](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-214) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:62ee7f8810e7048664530d896806e258ca17a27b5b97cb0effb1afd1d25fde46 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. To estimate the variable consideration to which the entity will be entitled, the entity decides to use the expected value method (see paragraph [606-10-32-8(a)](https://asc.understandingaccounting.org/asc/606/10/#606-10-32-8)) because it is the method that the entity expects to better predict the amount of consideration to which it will be entitled. Using the expected value method, the entity estimates that a discount of 40 percent will be provided and, therefore, the estimate of the variable consideration is $60,000 ($60 × 1,000 products). ##### [606-10-55-215](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-215) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:ce0809bf74f1b13016c67a95ad9962eeaf3fb85dbcf2da5978fe024b454efd0d Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The entity also considers the guidance in paragraphs [606-10-32-11 through 32-13](https://asc.understandingaccounting.org/asc/606/10/#606-10-32-11) on constraining estimates of variable consideration to determine whether some or all of the estimated amount of variable consideration of $60,000 can be included in the transaction price. The entity considers the factors in paragraph [606-10-32-12](https://asc.understandingaccounting.org/asc/606/10/#606-10-32-12) and observes that the amount of consideration is highly susceptible to factors outside the entity's influence (that is, risk of obsolescence) and it is likely that the entity may be required to provide a broad range of price concessions to move the products through the distribution chain. Consequently, the entity cannot include its estimate of $60,000 (that is, a discount of 40 percent) in the transaction price because it cannot conclude that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur. Although the entity's historical price concessions have ranged from 20 to 60 percent, market information currently suggests that a price concession of 15 to 50 percent will be necessary. The entity's actual results have been consistent with then-current market information in previous, similar transactions. Consequently, the entity concludes that it is probable that a significant reversal in the cumulative amount of revenue recognized will not occur if the entity includes $50,000 in the transaction price ($100 sales price and a 50 percent price concession) and, therefore, recognizes revenue at that amount. Therefore, the entity recognizes revenue of $50,000 when the products are transferred and reassesses the estimates of the transaction price at each reporting date until the uncertainty is resolved in accordance with paragraph [606-10-32-14](https://asc.understandingaccounting.org/asc/606/10/#606-10-32-14). ##### [606-10-55-216](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-216) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:6ee92c5fad2a45de29c20d267242c88fca25a8b5b7904177d2aa28ba315e0aec Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An entity enters into a contract with a customer on January 1, 20X8, to sell Product A for $100 per unit. If the customer purchases more than 1,000 units of Product A in a calendar year, the contract specifies that the price per unit is retrospectively reduced to $90 per unit. Consequently, the consideration in the contract is variable. ##### [606-10-55-217](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-217) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:a7289ee38bdcfc1edf746d7c814a58488ea47caaf7904c93c479d5b1f0261955 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. For the first quarter ended March 31, 20X8, the entity sells 75 units of Product A to the customer. The entity estimates that the customer's purchases will not exceed the 1,000-unit threshold required for the volume discount in the calendar year. ##### [606-10-55-218](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-218) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:4dac22e5c437e471e0d412ccd3115a6db71283c4b272eaa96340f1ebf0778802 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The entity considers the guidance in paragraphs [606-10-32-11 through 32-13](https://asc.understandingaccounting.org/asc/606/10/#606-10-32-11) on constraining estimates of variable consideration, including the factors in paragraph [606-10-32-12](https://asc.understandingaccounting.org/asc/606/10/#606-10-32-12). The entity determines that it has significant experience with this product and with the purchasing pattern of the entity. Thus, the entity concludes that it is probable that a significant reversal in the cumulative amount of revenue recognized (that is, $100 per unit) will not occur when the uncertainty is resolved (that is, when the total amount of purchases is known). Consequently, the entity recognizes revenue of $7,500 (75 units × $100 per unit) for the quarter ended March 31, 20X8. ##### [606-10-55-219](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-219) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:076a1fb6c8b4ed3632c29b3918dce4a378095ae2692d65760a83e27b84cde97e Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. In May 20X8, the entity's customer acquires another company and in the second quarter ended June 30, 20X8, the entity sells an additional 500 units of Product A to the customer. In light of the new fact, the entity estimates that the customer's purchases will exceed the 1,000-unit threshold for the calendar year and, therefore, it will be required to retrospectively reduce the price per unit to $90. ##### [606-10-55-220](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-220) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:cbde92658e4d56149fd7e382f2c5bcdb2122039ad960b822a780759db449b4a3 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Consequently, the entity recognizes revenue of $44,250 for the quarter ended June 30, 20X8. That amount is calculated from $45,000 for the sale of 500 units (500 units × $90 per unit) less the change in transaction price of $750 (75 units × $10 price reduction) for the reduction of revenue relating to units sold for the quarter ended March 31, 20X8 (see paragraphs [606-10-32-42 through 32-43](https://asc.understandingaccounting.org/asc/606/10/#606-10-32-42) ). ##### [606-10-55-221](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-221) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:8f7289835564bbaad5fb3dafbee32a9872386bf607feb401e41759596cec6d81 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. On January 1, 20X8, an entity enters into a contract with a client to provide asset management services for five years. The entity receives a 2 percent quarterly management fee based on the client's assets under management at the end of each quarter. In addition, the entity receives a performance-based incentive fee of 20 percent of the fund's return in excess of the return of an observable market index over the 5-year period. Consequently, both the management fee and the performance fee in the contract are variable consideration. ##### [606-10-55-222](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-222) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:c0976977c02caf0ede22051c0979bd70c91211e0fe7393cca3ace26b57dfca56 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The entity accounts for the services as a single performance obligation in accordance with paragraph [606-10-25-14(b)](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-14), because it is providing a series of distinct services that are substantially the same and have the same pattern of transfer (the services transfer to the customer over time and use the same method to measure progress—that is, a time-based measure of progress). ##### [606-10-55-223](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-223) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:46857d9debaba75967a417a160790d6bf23fd0ac1c7beb44c0fd34ffe51b13a1 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. At contract inception, the entity considers the guidance in paragraphs [606-10-32-5 through 32-9](https://asc.understandingaccounting.org/asc/606/10/#606-10-32-5) on estimating variable consideration and the guidance in paragraphs [606-10-32-11 through 32-13](https://asc.understandingaccounting.org/asc/606/10/#606-10-32-11) on constraining estimates of variable consideration, including the factors in paragraph [606-10-32-12](https://asc.understandingaccounting.org/asc/606/10/#606-10-32-12). The entity observes that the promised consideration is dependent on the market and, thus, is highly susceptible to factors outside the entity's influence. In addition, the incentive fee has a large number and a broad range of possible consideration amounts. The entity also observes that although it has experience with similar contracts, that experience is of little predictive value in determining the future performance of the market. Therefore, at contract inception, the entity cannot conclude that it is probable that a significant reversal in the cumulative amount of revenue recognized would not occur if the entity included its estimate of the management fee or the incentive fee in the transaction price. ##### [606-10-55-224](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-224) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:9439bc1ad98aeb71909066baf7f2bad1a088c72dfe8b5bbdf0b2e9afa39cee08 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. At each reporting date, the entity updates its estimate of the transaction price. Consequently, at the end of each quarter, the entity concludes that it can include in the transaction price the actual amount of the quarterly management fee because the uncertainty is resolved. However, the entity concludes that it cannot include its estimate of the incentive fee in the transaction price at those dates. This is because there has not been a change in its assessment from contract inception—the variability of the fee based on the market index indicates that the entity cannot conclude that it is probable that a significant reversal in the cumulative amount of revenue recognized would not occur if the entity included its estimate of the incentive fee in the transaction price. At March 31, 20X8, the client's assets under management are $100 million. Therefore, the resulting quarterly management fee and the transaction price is $2 million. ##### [606-10-55-225](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-225) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:5abad631c05b64d35f8e289d5b7e7569b8763a09ef9ad560b145549da438aa40 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. At the end of each quarter, the entity allocates the quarterly management fee to the distinct services provided during the quarter in accordance with paragraphs [606-10-32-39(b)](https://asc.understandingaccounting.org/asc/606/10/#606-10-32-39) and [606-10-32-40](https://asc.understandingaccounting.org/asc/606/10/#606-10-32-40). This is because the fee relates specifically to the entity's efforts to transfer the services for that quarter, which are distinct from the services provided in other quarters, and the resulting allocation will be consistent with the allocation objective in paragraph [606-10-32-28](https://asc.understandingaccounting.org/asc/606/10/#606-10-32-28). Consequently, the entity recognizes $2 million as revenue for the quarter ended March 31, 20X8. ##### [606-10-55-226](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-226) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:a9574e22f830625f01586e8c47b2f51191665b15883699a9e68e07f665eed41a Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Examples 26-30 illustrate the guidance in paragraphs [606-10-32-15 through 32-20](https://asc.understandingaccounting.org/asc/606/10/#606-10-32-15) on the existence of a significant financing component in the contract. In addition, the following guidance is illustrated in Example 26: 1. a Paragraphs [606-10-32-11 through 32-13](https://asc.understandingaccounting.org/asc/606/10/#606-10-32-11) on constraining estimates of variable consideration 2. b Paragraphs [606-10-55-22 through 55-29](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-22) on sales with a right of return. ##### [606-10-55-227](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-227) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:a91455168e203f865fc7e4bf7d374e5fe79533ce4aafcf8e1eb00460001ab640 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An entity sells a product to a customer for $121 that is payable 24 months after delivery. The customer obtains control of the product at contract inception. The contract permits the customer to return the product within 90 days. The product is new, and the entity has no relevant historical evidence of product returns or other available market evidence. ##### [606-10-55-228](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-228) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:04dff3d14aca9c28c6683e4de0e0e8021c55a52cb996153db9db9a64d37f1e68 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The cash selling price of the product is $100, which represents the amount that the customer would pay upon delivery for the same product sold under otherwise identical terms and conditions as at contract inception. The entity's cost of the product is $80. ##### [606-10-55-229](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-229) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:33951695f5ecc0077106b2e6006e5aa427e4da972f67c62e21628a6e4a157111 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The entity does not recognize revenue when control of the product transfers to the customer. This is because the existence of the right of return and the lack of relevant historical evidence means that the entity cannot conclude that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur in accordance with paragraphs [606-10-32-11 through 32-13](https://asc.understandingaccounting.org/asc/606/10/#606-10-32-11) . Consequently, revenue is recognized after three months when the right of return lapses. ##### [606-10-55-230](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-230) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:7401a61ea8be6fb2ba516af8d94b43c53623daf90956876bb52261fc8b351f9f Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The contract includes a significant financing component, in accordance with paragraphs [606-10-32-15 through 32-17](https://asc.understandingaccounting.org/asc/606/10/#606-10-32-15) . This is evident from the difference between the amount of promised consideration of $121 and the cash selling price of $100 at the date that the goods are transferred to the customer. ##### [606-10-55-231](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-231) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:082c036c800f786b49fde72ae0654d926566351179ede74b429fae9600f94cf8 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The contract includes an implicit interest rate of 10 percent (that is, the interest rate that over 24 months discounts the promised consideration of $121 to the cash selling price of $100). The entity evaluates the rate and concludes that it is commensurate with the rate that would be reflected in a separate financing transaction between the entity and its customer at contract inception. The following journal entries illustrate how the entity accounts for this contract in accordance with paragraphs [606-10-55-22 through 55-29](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-22) : 1. a When the product is transferred to the customer, in accordance with paragraph [606-10-55-23](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-23). - ![](https://asc.understandingaccounting.org/asc-img/GUID-15DF3EF7-F69B-4EF0-B657-61447A9B085D-low.gif) Asset for right to recover product to be returned $80 (a) Inventory $80 (a) This Example does not consider expected costs to recover the asset. 2. b During the three-month right of return period, no interest is recognized in accordance with paragraph [606-10-32-20](https://asc.understandingaccounting.org/asc/606/10/#606-10-32-20) because no contract asset or receivable has been recognized. 3. c When the right of return lapses (the product is not returned). - ![](https://asc.understandingaccounting.org/asc-img/GUID-1C8347CB-C220-4957-8300-13276699037A-low.gif) Receivable $100 (b) Revenue $100 Cost of sales $80 Asset for product to be returned $80 (b) The receivable recognized would be measured in accordance with Subtopic 326-20. This Example does not consider the credit loss accounting for the receivable. ##### [606-10-55-232](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-232) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:7fb400ddd29168697d82950f9cb7e8cfe458ec7b5911489572a361caab08c8ac Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Until the entity receives the cash payment from the customer, interest income would be recognized consistently with the subsequent measurement guidance in Subtopic 835-30 on imputation of interest. The entity would accrete the receivable up to $121 from the time the right of return lapses until customer payment. ##### [606-10-55-233](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-233) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:1e5da2adb3034eabdc1e0d1112df5dd1b2330fff8d06b52bf1446c628a564452 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An entity enters into a contract for the construction of a building that includes scheduled milestone payments for the performance by the entity throughout the contract term of three years. The performance obligation will be satisfied over time, and the milestone payments are scheduled to coincide with the entity's expected performance. The contract provides that a specified percentage of each milestone payment is to be withheld (that is, retained) by the customer throughout the arrangement and paid to the entity only when the building is complete. ##### [606-10-55-234](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-234) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:bfcb14a2b01b364107019121e48fd510717ced30e697f2fdfeb1ca3d7b12e36e Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The entity concludes that the contract does not include a significant financing component. The milestone payments coincide with the entity's performance, and the contract requires amounts to be retained for reasons other than the provision of finance in accordance with paragraph [606-10-32-17(c)](https://asc.understandingaccounting.org/asc/606/10/#606-10-32-17). The withholding of a specified percentage of each milestone payment is intended to protect the customer from the contractor failing to adequately complete its obligations under the contract. ##### [606-10-55-235](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-235) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:0d5368b256c7a9a624e4849a61e2edbad2a4873ef4a9d2f801fe12999090c800 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An entity enters into a contract with a customer to sell equipment. Control of the equipment transfers to the customer when the contract is signed. The price stated in the contract is $1 million plus a 5 percent contractual rate of interest, payable in 60 monthly installments of $18,871. ##### [606-10-55-236](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-236) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:d56d6991619969768ff1408b901d1977e35df3acb63a7ef7542a1f80730643f3 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. In evaluating the discount rate in the contract that contains a significant financing component, the entity observes that the 5 percent contractual rate of interest reflects the rate that would be used in a separate financing transaction between the entity and its customer at contract inception (that is, the contractual rate of interest of 5 percent reflects the credit characteristics of the customer). ##### [606-10-55-237](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-237) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:17e93fd63f916245abb03e88ca6ed33f3e57a72d965401d909189aa437e67d3e Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The market terms of the financing mean that the cash selling price of the equipment is $1 million. This amount is recognized as revenue and as a loan receivable when control of the equipment transfers to the customer. The entity accounts for the receivable in accordance with Topic 310 on receivables, Subtopic 326-20 on financial instruments measured at amortized cost, and Subtopic 835-30 on the imputation of interest. ##### [606-10-55-238](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-238) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:8f5daf661b0e9b9d07ecf01ff1dd2cfb53ee88a6b3afe7b093da1b89a5da75b6 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. In evaluating the discount rate in the contract that contains a significant financing component, the entity observes that the 5 percent contractual rate of interest is significantly lower than the 12 percent interest rate that would be used in a separate financing transaction between the entity and its customer at contract inception (that is, the contractual rate of interest of 5 percent does not reflect the credit characteristics of the customer). This suggests that the cash selling price is less than $1 million. ##### [606-10-55-239](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-239) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:9f117b145b686d251d9916bc7426433e424a6fa04a74702d38fc8db1476a5dc7 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. In accordance with paragraph [606-10-32-19](https://asc.understandingaccounting.org/asc/606/10/#606-10-32-19), the entity determines the transaction price by adjusting the promised amount of consideration to reflect the contractual payments using the 12 percent interest rate that reflects the credit characteristics of the customer. Consequently, the entity determines that the transaction price is $848,357 (60 monthly payments of $18,871 discounted at 12 percent). The entity recognizes revenue and a loan receivable for that amount. The entity accounts for the loan receivable in accordance with Subtopic 310-10 on receivables, Subtopic 326-20 on financial instruments measured at amortized cost, and Subtopic 835-30 on the imputation of interest. ##### [606-10-55-240](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-240) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:0ef1dc412388fd055c5ba5f2e9305bc7299bdd5faa3cd25e6b4ec6cd9c8980f6 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An entity enters into a contract with a customer to sell an asset. Control of the asset will transfer to the customer in two years (that is, the performance obligation will be satisfied at a point in time). The contract includes 2 alternative payment options: payment of $5,000 in 2 years when the customer obtains control of the asset or payment of $4,000 when the contract is signed. The customer elects to pay $4,000 when the contract is signed. ##### [606-10-55-241](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-241) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:ffa4afa6fcce442f2ca7d1b9f1ea6f382f4b793a9a366b90b12a7594274c0d69 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The entity concludes that the contract contains a significant financing component because of the length of time between when the customer pays for the asset and when the entity transfers the asset to the customer, as well as the prevailing interest rates in the market. ##### [606-10-55-242](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-242) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:9b085fe1240df603ada1b1069600367eb9ef0d689296aeded37aa0b2c3273a5d Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The interest rate implicit in the transaction is 11.8 percent, which is the interest rate necessary to make the 2 alternative payment options economically equivalent. However, the entity determines that, in accordance with paragraph [606-10-32-19](https://asc.understandingaccounting.org/asc/606/10/#606-10-32-19), the rate that should be used in adjusting the promised consideration is 6 percent, which is the entity's incremental borrowing rate. ##### [606-10-55-243](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-243) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:ccca74ac773e4eed989937b834ed6f21cf3231f44b1582cb6332719b88d58743 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The following journal entries illustrate how the entity would account for the significant financing component. 1. a Recognize a contract liability for the $4,000 payment received at contract inception. - ![](https://asc.understandingaccounting.org/asc-img/GUID-FA1B1083-8162-466E-A74B-3576FA0805DB-low.gif) Cash "$4,000 " Contract liability "$4,000 " 2. b During the 2 years from contract inception until the transfer of the asset, the entity adjusts the promised amount of consideration (in accordance with paragraph [606-10-32-20](https://asc.understandingaccounting.org/asc/606/10/#606-10-32-20)) and accretes the contract liability by recognizing interest on $4,000 at 6 percent for 2 years. - ![](https://asc.understandingaccounting.org/asc-img/GUID-CA63D3C0-84AC-426B-9CB5-3875993C198A-low.gif) Interest expense $494 (a) Contract liability $494 "(a) $494 = $4,000 contract liability × (6 percent interest per" year for 2 years) 3. c Recognize revenue for the transfer of the asset. - ![](https://asc.understandingaccounting.org/asc-img/GUID-9D4D7E7B-F4EF-42A0-B467-0E8323E1DCB2-low.gif) Contract liability "$4,494 " Revenue "$4,494 " ##### [606-10-55-244](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-244) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:b06dffe0ffd422d4245694a441e2e8fc85cd07bc55b228bd8910c6248e89460f Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An entity, a technology product manufacturer, enters into a contract with a customer to provide global telephone technology support and repair coverage for three years along with its technology product. The customer purchases this support service at the time of buying the product. Consideration for the service is an additional $300. Customers electing to buy this service must pay for it upfront (that is, a monthly payment option is not available). ##### [606-10-55-245](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-245) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:c98ca5fc879a150fc053389146d671e8c0f62d0fbdc3e031a42497f720e8bbe6 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. To determine whether there is a significant financing component in the contract, the entity considers the nature of the service being offered and the purpose of the payment terms. The entity charges a single upfront amount, not with the primary purpose of obtaining financing from the customer but, instead, to maximize profitability, taking into consideration the risks associated with providing the service. Specifically, if customers could pay monthly, they would be less likely to renew, and the population of customers that continue to use the support service in the later years may become smaller and less diverse over time (that is, customers that choose to renew historically are those that make greater use of the service, thereby increasing the entity's costs). In addition, customers tend to use services more if they pay monthly rather than making an upfront payment. Finally, the entity would incur higher administration costs such as the costs related to administering renewals and collection of monthly payments. ##### [606-10-55-246](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-246) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:db7102c051fb9883fff35401287a7dcff586b9256d6714f606818654c8ff47c2 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. In assessing the guidance in paragraph [606-10-32-17(c)](https://asc.understandingaccounting.org/asc/606/10/#606-10-32-17), the entity determines that the payment terms were structured primarily for reasons other than the provision of finance to the entity. The entity charges a single upfront amount for the services because other payment terms (such as a monthly payment plan) would affect the nature of the risks assumed by the entity to provide the service and may make it uneconomical to provide the service. As a result of its analysis, the entity concludes that there is not a significant financing component. ##### [606-10-55-247](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-247) Pending content: yes Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:63e9393102591a85ceaa02dce74fdf6dcb11422a4d233c0a7ea00c39a5a1e9e9 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Example 31 illustrates the guidance in paragraphs [606-10-32-21 through 32-24](https://asc.understandingaccounting.org/asc/606/10/#606-10-32-21) on noncash consideration. In addition, the following guidance is illustrated in this Example: 1. a Paragraph [606-10-25-14](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-14) on identifying performance obligations 2. b Paragraphs [606-10-32-11 through 32-13](https://asc.understandingaccounting.org/asc/606/10/#606-10-32-11) on constraining estimates of variable consideration. Transition date:(P) December 16, 2026; (N) December 16, 2026Transition guidance: [606-10-65-3](https://asc.understandingaccounting.org/asc/606/10/#606-10-65-3)Example 31 illustrates the guidance in paragraph [606-10-15-3A](https://asc.understandingaccounting.org/asc/606/10/#606-10-15-3A) on share-based noncash consideration from a customer for the transfer of goods or services and the guidance in paragraphs [606-10-32-21 through 32-24](https://asc.understandingaccounting.org/asc/606/10/#606-10-32-21) on noncash consideration. In addition, the following guidance is illustrated in this Example: 1. a Paragraph [606-10-25-14](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-14) on identifying performance obligations 2. b Paragraphs [606-10-32-11 through 32-13](https://asc.understandingaccounting.org/asc/606/10/#606-10-32-11) on constraining estimates of variable consideration. ##### [606-10-55-248](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-248) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:4b8a62eae68cf6389e7b58abd59e7bb9b0cd22e30bfeca9725b1c1dc1a2d3f4f Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An entity enters into a contract with a customer to provide a weekly service for one year. The contract is signed on January 1, 20X1, and work begins immediately. The entity concludes that the service is a single performance obligation in accordance with paragraph [606-10-25-14(b)](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-14). This is because the entity is providing a series of distinct services that are substantially the same and have the same pattern of transfer (the services transfer to the customer over time and use the same method to measure progress—that is, a time-based measure of progress). ##### [606-10-55-249](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-249) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:ee2841fef797f06e3152c52750916ef1a56606e93217b73540ad69b704860ede Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. In exchange for the service, the customer promises 100 shares of its common stock per week of service (a total of 5,200 shares for the contract). The terms in the contract require that the shares must be paid upon the successful completion of each week of service. ##### [606-10-55-250](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-250) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:30be58c41d8dfc26918af56a36c2daf38edcfeb27a329b434c9ddba3d03220a7 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. To determine the transaction price (and the amount of revenue to be recognized), the entity measures the estimated fair value of 5,200 shares at contract inception (that is, on January 1, 20X1). The entity measures its progress toward complete satisfaction of the performance obligation and recognizes revenue as each week of service is complete. The entity does not reflect any changes in the fair value of the 5,200 shares after contract inception in the transaction price. However, the entity assesses any related contract asset or receivable for impairment. Upon receipt of the noncash consideration, the entity would apply the guidance related to the form of the noncash consideration to determine whether and how any changes in fair value that occurred after contract inception should be recognized. ##### [606-10-55-250A](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-250A) Pending content: yes Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:f75c1a12e3405544f1e15250f0280bf1f85bc4ccfd7977b47219e270787a1775 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Transition date:(P) December 16, 2026; (N) December 16, 2026Transition guidance: [606-10-65-3](https://asc.understandingaccounting.org/asc/606/10/#606-10-65-3)Example 31A illustrates the guidance in paragraph [606-10-15-3A](https://asc.understandingaccounting.org/asc/606/10/#606-10-15-3A) on share-based noncash consideration from a customer for the transfer of goods or services and the guidance in paragraphs [606-10-32-21 through 32-24](https://asc.understandingaccounting.org/asc/606/10/#606-10-32-21) on noncash consideration. In addition, the following guidance is illustrated in this Example: 1. a Paragraph [606-10-25-14](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-14) on identifying performance obligations 2. b Paragraph [606-10-32-4](https://asc.understandingaccounting.org/asc/606/10/#606-10-32-4) on determining transaction price 3. c Paragraphs [606-10-32-5 through 32-14](https://asc.understandingaccounting.org/asc/606/10/#606-10-32-5) on variable consideration 4. d Paragraphs [606-10-32-28 through 32-41](https://asc.understandingaccounting.org/asc/606/10/#606-10-32-28) on allocating transaction price to the performance obligations in the contract 5. e Paragraph [606-10-45-4](https://asc.understandingaccounting.org/asc/606/10/#606-10-45-4) on an unconditional right to consideration. ##### [606-10-55-250B](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-250B) Pending content: yes Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:00a5da37f68dec3ae53b80a6f1a17294708d6671121875495ba4703bdf0e9eb5 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Transition date:(P) December 16, 2026; (N) December 16, 2026Transition guidance: [606-10-65-3](https://asc.understandingaccounting.org/asc/606/10/#606-10-65-3)On January 1, 20X7, an entity enters into a contract with a customer to sell 5,000 units of Product A. The customer will pay $100 for each unit upon delivery. If the entity delivers all 5,000 units within 2 years from contract inception, the customer promises a performance bonus of 100 warrants for the customer’s common stock. The estimated fair value of the 100 warrants at contract inception is $100,000. At contract inception, the entity concludes that each unit is a performance obligation that is satisfied at a point in time. Based on its experience, the entity expects that all 5,000 units will be delivered to the customer before the end of 20X8. Accordingly, it concludes that the variable consideration related to the 100 warrants is not constrained and the transaction price is $600,000 (\[5,000 units × $100\] + $100,000 estimated fair value of 100 warrants at contract inception). Accordingly, the transaction price allocated to each unit is $120 ($600,000/5,000 units). ##### [606-10-55-250C](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-250C) Pending content: yes Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:83d4cbe12487a556c79c3f6b0a29cdd0fe177937c13016dfab103e44b26a7e4d Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Transition date:(P) December 16, 2026; (N) December 16, 2026Transition guidance: [606-10-65-3](https://asc.understandingaccounting.org/asc/606/10/#606-10-65-3)During 20X7, the entity delivers 3,000 units to the customer. At the end of 20X7, the entity continues to expect that the remaining 2,000 units will be delivered to the customer before the end of 20X8. Therefore, the transaction price determined at contract inception is unchanged. For 20X7, the entity recognizes revenue of $360,000 (3,000 units × $120), cash of $300,000, and a contract asset of $60,000 ($100,000 estimated fair value of 100 warrants at contract inception × \[3,000 delivered units/5,000 units\]). The entity does not reflect any changes in the fair value of the 100 warrants in the transaction price. However, the entity assesses the related contract asset for impairment. ##### [606-10-55-250D](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-250D) Pending content: yes Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:f6267ac3ef0eb5f3a65f372e603f0806f9c2e182b85b435a6f4533439d84d860 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Transition date:(P) December 16, 2026; (N) December 16, 2026Transition guidance: [606-10-65-3](https://asc.understandingaccounting.org/asc/606/10/#606-10-65-3)During 20X8, the entity delivers the remaining 2,000 units to the customer. For 20X8, the entity recognizes revenue of $240,000 (2,000 units × $120), cash of $200,000, and a contract asset of $40,000 ($100,000 estimated fair value of 100 warrants at contract inception × \[2,000 delivered units/5,000 units\]). The entity does not reflect any changes in the fair value of the 100 warrants in the transaction price. However, the entity assesses the related contract asset for impairment. When all 5,000 units have been delivered, the entity concludes that its right to receive or retain the 100 warrants is unconditional under this Topic. At that point, the entity derecognizes the contract asset and applies the guidance in other Topics to account for the 100 warrants. ##### [606-10-55-251](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-251) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:edf98aa695f8c6784565735241bf30f24a4d6f0234dc5e50a9e07f0468ab5a7e Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Example 32 illustrates the guidance in paragraphs [606-10-32-25 through 32-27](https://asc.understandingaccounting.org/asc/606/10/#606-10-32-25) on consideration payable to a customer. ##### [606-10-55-252](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-252) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:97cdff69a4b131b05c43bdeea2664560e74a422273b54e1f4f84a63dc458e401 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An entity that manufactures consumer goods enters into a one-year contract to sell goods to a customer that is a large global chain of retail stores. The customer commits to buy at least $15 million of products during the year. The contract also requires the entity to make a nonrefundable payment of $1.5 million to the customer at the inception of the contract. The $1.5 million payment will compensate the customer for the changes it needs to make to its shelving to accommodate the entity's products. ##### [606-10-55-253](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-253) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:376287b30064bbd4f552542b07b06aa3b5e86d1f0e00bb25710848548925207b Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The entity considers the guidance in paragraphs [606-10-32-25 through 32-27](https://asc.understandingaccounting.org/asc/606/10/#606-10-32-25) and concludes that the payment to the customer is not in exchange for a distinct good or service that transfers to the entity. This is because the entity does not obtain control of any rights to the customer's shelves. Consequently, the entity determines that, in accordance with paragraph [606-10-32-25](https://asc.understandingaccounting.org/asc/606/10/#606-10-32-25), the $1.5 million payment is a reduction of the transaction price. ##### [606-10-55-254](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-254) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:a7e5239d0572be722c526e28677d697aa162f1511d9e04c7d9c8593ac6f04418 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The entity applies the guidance in paragraph [606-10-32-27](https://asc.understandingaccounting.org/asc/606/10/#606-10-32-27) and concludes that the consideration payable is accounted for as a reduction in the transaction price when the entity recognizes revenue for the transfer of the goods. Consequently, as the entity transfers goods to the customer, the entity reduces the transaction price for each good by 10 percent ($1.5 million ÷ $15 million). Therefore, in the first month in which the entity transfers goods to the customer, the entity recognizes revenue of $1.8 million ($2.0 million invoiced amount - $0.2 million of consideration payable to the customer). ##### [606-10-55-255](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-255) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:b603b508c90349e16145fa312077bad1d8785e2d2462d8ff7494be767d46a1c1 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Examples 33-35 illustrate the guidance in paragraphs [606-10-32-28 through 32-41](https://asc.understandingaccounting.org/asc/606/10/#606-10-32-28) on allocating the transaction price to performance obligations. In addition, the following guidance is illustrated in Example 35: 1. a Paragraph [606-10-32-8](https://asc.understandingaccounting.org/asc/606/10/#606-10-32-8) on variable consideration 2. b Paragraph [606-10-55-65](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-65) on consideration in the form of sales-based or usage-based royalties on licenses of intellectual property. ##### [606-10-55-256](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-256) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:83d8109b8807b119dd0c1eb0d77a623935058c2458f4963ecf90766e2aa16fc9 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An entity enters into a contract with a customer to sell Products A, B, and C in exchange for $100. The entity will satisfy the performance obligations for each of the products at different points in time. The entity regularly sells Product A separately, and, therefore the standalone selling price is directly observable. The standalone selling prices of Products B and C are not directly observable. ##### [606-10-55-257](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-257) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:715039cc64ddcd541faf4587f9bb79efba65ddaf4bd68859e549307b3281cf6d Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Because the standalone selling prices for Products B and C are not directly observable, the entity must estimate them. To estimate the standalone selling prices, the entity uses the adjusted market assessment approach for Product B and the expected cost plus a margin approach for Product C. In making those estimates, the entity maximizes the use of observable inputs (in accordance with paragraph [606-10-32-33](https://asc.understandingaccounting.org/asc/606/10/#606-10-32-33)). The entity estimates the standalone selling prices as follows: - ![](https://asc.understandingaccounting.org/asc-img/GUID-8108F66E-8B1A-431F-8562-5F2A57369C77-low.gif) Product Standalone Selling Price Method Product A $50 Directly observable (see paragraph 606-10-32-32) Product B 25 Adjusted market assessment approach (see paragraph 606-10-32-34(a)) Product C 75 Expected cost plus a margin approach (see paragraph 606-10-32-34(b)) Total $150 ##### [606-10-55-258](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-258) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:0d61707c10a304bac9a58eb98bb3e791d4f0d12fea379b455aa333f31927c947 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The customer receives a discount for purchasing the bundle of goods because the sum of the standalone selling prices ($150) exceeds the promised consideration ($100). The entity considers whether it has observable evidence about the performance obligation to which the entire discount belongs (in accordance with paragraph [606-10-32-37](https://asc.understandingaccounting.org/asc/606/10/#606-10-32-37)) and concludes that it does not. Consequently, in accordance with paragraphs [606-10-32-31](https://asc.understandingaccounting.org/asc/606/10/#606-10-32-31) and [606-10-32-36](https://asc.understandingaccounting.org/asc/606/10/#606-10-32-36), the discount is allocated proportionately across Products A, B, and C. The discount, and therefore the transaction price, is allocated as follows: - ![](https://asc.understandingaccounting.org/asc-img/GUID-5CEFDA8D-1F79-4123-8600-9B1C547F7609-low.gif) Product Allocated Transaction Price Product A $33 ($50 ÷ $150 × $100) Product B 17 ($25 ÷ $150 × $100) Product C 50 ($75 ÷ $150 × $100) Total $100 ##### [606-10-55-259](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-259) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:1354a2236e07557f9b78d29251f5948d2abe95378d75d4d59b4ad6b34d4af91a Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An entity regularly sells Products A, B, and C individually, thereby establishing the following standalone selling prices: - ![](https://asc.understandingaccounting.org/asc-img/GUID-236A067E-F1D4-4685-8F2B-FEFAEAC09BAE-low.gif) Product "Standalone Selling Price" Product A $40 Product B 55 Product C 45 Total $140 ##### [606-10-55-260](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-260) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:0792f89683ff221126ac4c3ec3d022bc920079f4af42f444dc6a2d26cd767c66 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. In addition, the entity regularly sells Products B and C together for $60. ##### [606-10-55-261](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-261) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:d9966790c55dc96fc432c41de84d040160f432fbacddfdd9ae701f10ddecd796 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The entity enters into a contract with a customer to sell Products A, B, and C in exchange for $100. The entity will satisfy the performance obligations for each of the products at different points in time. ##### [606-10-55-262](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-262) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:fd1360511818424db722676bfe428b30ee44535bede2cfe059951ca148f68b29 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The contract includes a discount of $40 on the overall transaction, which would be allocated proportionately to all 3 performance obligations when allocating the transaction price using the relative standalone selling price method (in accordance with paragraph [606-10-32-36](https://asc.understandingaccounting.org/asc/606/10/#606-10-32-36)). However, because the entity regularly sells Products B and C together for $60 and Product A for $40, it has evidence that the entire discount should be allocated to the promises to transfer Products B and C in accordance with paragraph [606-10-32-37](https://asc.understandingaccounting.org/asc/606/10/#606-10-32-37). ##### [606-10-55-263](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-263) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:de2b1ab6d796bb0c92564a3833ca749ea8f9e3d16f257f227e86ab5e581f87cf Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If the entity transfers control of Products B and C at the same point in time, then the entity could, as a practical matter, account for the transfer of those products as a single performance obligation. That is, the entity could allocate $60 of the transaction price to the single performance obligation and recognize revenue of $60 when Products B and C simultaneously transfer to the customer. ##### [606-10-55-264](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-264) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:4eb7f5b92436803cb7f9ef4a396945c070b7b083227b34d089151721d9011e0d Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If the contract requires the entity to transfer control of Products B and C at different points in time, then the allocated amount of $60 is individually allocated to the promises to transfer Product B (standalone selling price of $55) and Product C (standalone selling price of $45) as follows: - ![](https://asc.understandingaccounting.org/asc-img/GUID-A536E0E2-8D28-4ADE-B640-B956B0B219F2-low.gif) Product Allocated Transaction Price Product B $33 ($55 ÷ $100 total standalone selling price × $60) Product C 27 ($45 ÷ $100 total standalone selling price × $60) Total $60 ##### [606-10-55-265](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-265) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:b85f5254d2d948582e8b00320081f33fa1a66d4755ec779745aa213951812c03 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The entity enters into a contract with a customer to sell Products A, B, and C as described in Case A. The contract also includes a promise to transfer Product D. Total consideration in the contract is $130. The standalone selling price for Product D is highly variable (see paragraph [606-10-32-34(c)(1)](https://asc.understandingaccounting.org/asc/606/10/#606-10-32-34)) because the entity sells Product D to different customers for a broad range of amounts ($15 - $45). Consequently, the entity decides to estimate the standalone selling price of Product D using the residual approach. ##### [606-10-55-266](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-266) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:7a3ec21a5d27e20c01541b622958bc73fea5814a2cf00063fb94318806c5fbc3 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Before estimating the standalone selling price of Product D using the residual approach, the entity determines whether any discount should be allocated to the other performance obligations in the contract in accordance with paragraphs [606-10-32-37 through 32-38](https://asc.understandingaccounting.org/asc/606/10/#606-10-32-37) . ##### [606-10-55-267](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-267) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:25eec0f2e79a8fa57a98f61095bb880e0ccdfced7a9e559d4b89c39cf0c6757a Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. As in Case A, because the entity regularly sells Products B and C together for $60 and Product A for $40, it has observable evidence that $100 should be allocated to those 3 products and a $40 discount should be allocated to the promises to transfer Products B and C in accordance with paragraph [606-10-32-37](https://asc.understandingaccounting.org/asc/606/10/#606-10-32-37). Using the residual approach, the entity estimates the standalone selling price of Product D to be $30 as follows: - ![](https://asc.understandingaccounting.org/asc-img/GUID-679F58CE-AC43-4046-A978-244A5A2BFFE0-low.gif) Product "Standalone Selling Price" Method Product A $40 Directly observable (see paragraph 606-10-32-32) Products B and C 60 Directly observable with discount (see paragraph 606-10-32-37) Product D 30 Residual approach (see paragraph 606-10-32-34(c)) Total $130 ##### [606-10-55-268](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-268) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:04a097676909f35f26c623ea76335374e6a16389ebfbd46f5d35a93d2495b02a Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The entity observes that the resulting $30 allocated to Product D is within the range of its observable selling prices ($15 - $45). Therefore, the resulting allocation (see above table) is consistent with the allocation objective in paragraph [606-10-32-28](https://asc.understandingaccounting.org/asc/606/10/#606-10-32-28) and the guidance in paragraph [606-10-32-33](https://asc.understandingaccounting.org/asc/606/10/#606-10-32-33). ##### [606-10-55-269](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-269) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:9867f4da52289325ba27c8e51a85041efac3398d8753806a81720f65601d92b7 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The same facts as in Case B apply to Case C except the transaction price is $105 instead of $130. Consequently, the application of the residual approach would result in a standalone selling price of $5 for Product D ($105 transaction price less $100 allocated to Products A, B, and C). The entity concludes that $5 would not faithfully depict the amount of consideration to which the entity expects to be entitled in exchange for satisfying its performance obligation to transfer Product D because $5 does not approximate the standalone selling price of Product D, which ranges from $15 - $45. Consequently, the entity reviews its observable data, including sales and margin reports, to estimate the standalone selling price of Product D using another suitable method. The entity allocates the transaction price of $105 to Products A, B, C, and D using the relative standalone selling prices of those products in accordance with paragraphs [606-10-32-28 through 32-35](https://asc.understandingaccounting.org/asc/606/10/#606-10-32-28) . ##### [606-10-55-270](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-270) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:ae3ef113add5224495ba75593e9d8f190848faa0c07ff6d0d9858bd7495f3f5e Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An entity enters into a contract with a customer for two intellectual property licenses (Licenses X and Y), which the entity determines to represent two performance obligations each satisfied at a point in time. The standalone selling prices of Licenses X and Y are $800 and $1,000, respectively. ##### [606-10-55-271](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-271) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:9cd9d8d2b4d36b95548c3bc06c08c8787064e72330bb17435be4976c9aae2db4 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The price stated in the contract for License X is a fixed amount of $800, and for License Y the consideration is 3 percent of the customer's future sales of products that use License Y. For purposes of allocation, the entity estimates its sales-based royalties (that is, the variable consideration) to be $1,000, in accordance with paragraph [606-10-32-8](https://asc.understandingaccounting.org/asc/606/10/#606-10-32-8). ##### [606-10-55-272](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-272) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:356d40c9f04e3e9871bc3f3caca2739919bd05dc24e7a6c8991d873460918241 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. To allocate the transaction price, the entity considers the criteria in paragraph [606-10-32-40](https://asc.understandingaccounting.org/asc/606/10/#606-10-32-40) and concludes that the variable consideration (that is, the sales-based royalties) should be allocated entirely to License Y. The entity concludes that the criteria in paragraph [606-10-32-40](https://asc.understandingaccounting.org/asc/606/10/#606-10-32-40) are met for the following reasons: 1. a The variable payment relates specifically to an outcome from the performance obligation to transfer License Y (that is, the customer's subsequent sales of products that use License Y). 2. b Allocating the expected royalty amounts of $1,000 entirely to License Y is consistent with the allocation objective in paragraph [606-10-32-28](https://asc.understandingaccounting.org/asc/606/10/#606-10-32-28). This is because the entity's estimate of the amount of sales-based royalties ($1,000) approximates the standalone selling price of License Y and the fixed amount of $800 approximates the standalone selling price of License X. The entity allocates $800 to License X in accordance with paragraph [606-10-32-41](https://asc.understandingaccounting.org/asc/606/10/#606-10-32-41). This is because, based on an assessment of the facts and circumstances relating to both licenses, allocating to License Y some of the fixed consideration in addition to all of the variable consideration would not meet the allocation objective in paragraph [606-10-32-28](https://asc.understandingaccounting.org/asc/606/10/#606-10-32-28). ##### [606-10-55-273](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-273) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:2dfecdbb2e4cd2914f999c5a66d8ab879c16a9ff2dff4efed153a26ec2f620a4 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The entity transfers License Y at inception of the contract and transfers License X one month later. Upon the transfer of License Y, the entity does not recognize revenue because the consideration allocated to License Y is in the form of a sales-based royalty. Therefore, in accordance with paragraph [606-10-55-65](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-65), the entity recognizes revenue for the sales-based royalty when those subsequent sales occur. ##### [606-10-55-274](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-274) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:0e74cda4e5bd518963bac8f148d35baf5d5ff30d173efe38fa67d983a2b4e956 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. When License X is transferred, the entity recognizes as revenue the $800 allocated to License X. ##### [606-10-55-275](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-275) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:d64f7a2b4e40a5dcb79b3e0b98117dd4197705d98bd0e5bccd8e520432d09c31 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The price stated in the contract for License X is a fixed amount of $300, and for License Y the consideration is 5 percent of the customer's future sales of products that use License Y. The entity's estimate of the sales-based royalties (that is, the variable consideration) is $1,500 in accordance with paragraph [606-10-32-8](https://asc.understandingaccounting.org/asc/606/10/#606-10-32-8). ##### [606-10-55-276](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-276) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:78d0228ffd5b359f33b6d7356411705899567a662bc79fc87f372902ed12bc6a Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. To allocate the transaction price, the entity applies the criteria in paragraph [606-10-32-40](https://asc.understandingaccounting.org/asc/606/10/#606-10-32-40) to determine whether to allocate the variable consideration (that is, the sales-based royalties) entirely to License Y. In applying the criteria, the entity concludes that even though the variable payments relate specifically to an outcome from the performance obligation to transfer License Y (that is, the customer's subsequent sales of products that use License Y), allocating the variable consideration entirely to License Y would be inconsistent with the principle for allocating the transaction price. Allocating $300 to License X and $1,500 to License Y does not reflect a reasonable allocation of the transaction price on the basis of the standalone selling prices of Licenses X and Y of $800 and $1,000, respectively. Consequently, the entity applies the general allocation requirements in paragraphs [606-10-32-31 through 32-35](https://asc.understandingaccounting.org/asc/606/10/#606-10-32-31) . ##### [606-10-55-277](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-277) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:3626906cecff63d5c2fc5d1813e38461bafec08fa12beac25a72c7fe5f8b00e5 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The entity allocates the transaction price of $300 to Licenses X and Y on the basis of relative standalone selling prices of $800 and $1,000, respectively. The entity also allocates the consideration related to the sales-based royalty on a relative standalone selling price basis. However, in accordance with paragraph [606-10-55-65](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-65), when an entity licenses intellectual property in which the consideration is in the form of a sales-based royalty, the entity cannot recognize revenue until the later of the following events: the subsequent sales occur or the performance obligation is satisfied (or partially satisfied). ##### [606-10-55-278](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-278) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:7da1d5e1ec80abe35780977579d02c27da5cea6db4977a95d7bce99465d2ffb9 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. License Y is transferred to the customer at the inception of the contract, and License X is transferred three months later. When License Y is transferred, the entity recognizes as revenue the $167 ($1,000 ÷ $1,800 × $300) allocated to License Y. When License X is transferred, the entity recognizes as revenue the $133 ($800 ÷ $1,800 × $300) allocated to License X. ##### [606-10-55-279](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-279) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:4ba2309c91b395ff5a9512031e3fd80116362ad69df58b3543fd6d85eb6ae950 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. In the first month, the royalty due from the customer's first month of sales is $200. Consequently, in accordance with paragraph [606-10-55-65](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-65), the entity recognizes as revenue the $111 ($1,000 ÷ $1,800 × $200) allocated to License Y (which has been transferred to the customer and is therefore a satisfied performance obligation). The entity recognizes a contract liability for the $89 ($800 ÷ $1,800 × $200) allocated to License X. This is because although the subsequent sale by the entity's customer has occurred, the performance obligation to which the royalty has been allocated has not been satisfied. ##### [606-10-55-280](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-280) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:34af80e98e500857b1d770575b7d155141e61833d50f21a79dc4512c1a637ac7 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Examples 36 and 37 illustrate the guidance in paragraphs [340-40-25-1 through 25-4](https://asc.understandingaccounting.org/asc/340/40/#340-40-25-1) on incremental costs of obtaining a contract, paragraphs [340-40-25-5 through 25-8](https://asc.understandingaccounting.org/asc/340/40/#340-40-25-5) on costs to fulfill a contract, and paragraphs [340-40-35-1 through 35-6](https://asc.understandingaccounting.org/asc/340/40/#340-40-35-1) on amortization and impairment of contract costs. ##### [606-10-55-281](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-281) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:a3e530f28992870a1e9e4deb6ec77f1f33798ffc4c3f4475985cf6d185a144cf Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. For an illustration of the incremental costs of obtaining a contract, see Example 1 in Subtopic 340-40 on other assets and deferred costs—costs related to a contract with a customer (paragraphs [340-40-55-2 through 55-4](https://asc.understandingaccounting.org/asc/340/40/#340-40-55-2) ). ##### [606-10-55-282](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-282) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:d73093b2213f1094dd483efe3f09caef2553860551feb6d8cf15673bd8567adf Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. For an illustration of costs that give rise to an asset, see Example 2 in Subtopic 340-40 on other assets and deferred costs—costs related to a contract with a customer (paragraphs [340-40-55-5 through 55-9](https://asc.understandingaccounting.org/asc/340/40/#340-40-55-5) ). ##### [606-10-55-283](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-283) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:6b228be4c4cc3cce9c42640834d022c95923c79a2d5507111a11fffbcc49ac8c Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Examples 38-40 illustrate the guidance in paragraphs [606-10-45-1 through 45-5](https://asc.understandingaccounting.org/asc/606/10/#606-10-45-1) on the presentation of contract balances. ##### [606-10-55-284](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-284) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:d9ee23ac69dd7836a86207547a37c33e088eb5c8f001002220527691dc31a5aa Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. On January 1, 20X9, an entity enters into a cancellable contract to transfer a product to a customer on March 31, 20X9. The contract requires the customer to pay consideration of $1,000 in advance on January 31, 20X9. The customer pays the consideration on March 1, 20X9. The entity transfers the product on March 31, 20X9. The following journal entries illustrate how the entity accounts for the contract: 1. a The entity receives cash of $1,000 on March 1, 20X9 (cash is received in advance of performance). - ![](https://asc.understandingaccounting.org/asc-img/GUID-9CBC2EE0-0126-4392-85DA-6FBCCEEB7AD9-low.gif) Cash "$1,000 " Contract liability "$1,000 " 2. b The entity satisfies the performance obligation on March 31, 20X9. - ![](https://asc.understandingaccounting.org/asc-img/GUID-EF1D7193-70DD-4CA1-9E51-2321B87E5B7D-low.gif) Contract liability "$1,000 " Revenue "$1,000 " ##### [606-10-55-285](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-285) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:7eff75370bee63895ecf4d9e030a21d559ebc09cb76f9e40e77666f29c695c4a Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The same facts as in Case A apply to Case B except that the contract becomes noncancellable on January 31, 20X9. The following journal entries illustrate how the entity accounts for the contract: 1. a January 31, 20X9 is the date at which the entity recognizes a receivable because it has an unconditional right to consideration. - ![](https://asc.understandingaccounting.org/asc-img/GUID-542B47DF-E3C7-4DB5-A778-14744C73AC16-low.gif) Receivable "$1,000 " Contract liability "$1,000 " 2. b The entity receives the cash on March 1, 20X9. - ![](https://asc.understandingaccounting.org/asc-img/GUID-874EBD16-11CF-4E4D-8B1F-16D03B7F4F80-low.gif) Cash "$1,000 " Receivable "$1,000 " 3. c The entity satisfies the performance obligation on March 31, 20X9. - ![](https://asc.understandingaccounting.org/asc-img/GUID-BE2D0398-A045-4D14-8CCF-0966237B4F39-low.gif) Contract liability "$1,000 " Revenue "$1,000 " ##### [606-10-55-286](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-286) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:949ebe2ebd0fdbb8a3c4842dcf7d15ab833a7d6843634203c55625bdea49db9b Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If the entity issued the invoice before January 31, 20X9, the entity would not recognize the receivable and the contract liability in the statement of financial position because the entity does not yet have a right to consideration that is unconditional (the contract is cancellable before January 31, 20X9). ##### [606-10-55-287](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-287) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:1ce69e43199a5090d39ef0734ba9f16e83c65bbcdc225838edbf64b945635692 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. On January 1, 20X8, an entity enters into a contract to transfer Products A and B to a customer in exchange for $1,000. The contract requires Product A to be delivered first and states that payment for the delivery of Product A is conditional on the delivery of Product B. In other words, the consideration of $1,000 is due only after the entity has transferred both Products A and B to the customer. Consequently, the entity does not have a right to consideration that is unconditional (a receivable) until both Products A and B are transferred to the customer. ##### [606-10-55-288](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-288) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:0f3a7575ab2f03541f89fd6051f43028033b04a5c37dcbee5468e37296bd5914 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The entity identifies the promises to transfer Products A and B as performance obligations and allocates $400 to the performance obligation to transfer Product A and $600 to the performance obligation to transfer Product B on the basis of their relative standalone selling prices. The entity recognizes revenue for each respective performance obligation when control of the product transfers to the customer. ##### [606-10-55-289](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-289) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:a3c8ad5c9e51c60499e5b8e2e1e17ca9c5484ea3cb07875bd3ff433912f49dab Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The entity satisfies the performance obligation to transfer Product A. - ![](https://asc.understandingaccounting.org/asc-img/GUID-8C1B3A4F-EA41-4ED0-BCB2-C8FDE632C842-low.gif) Contract asset $400 Revenue $400 ##### [606-10-55-290](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-290) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:a27a3ccd517ef2a11d2f2df6cebdf71ede306ca3de286724fbebf9b21649a0db Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The entity satisfies the performance obligation to transfer Product B and to recognize the unconditional right to consideration. - ![](https://asc.understandingaccounting.org/asc-img/GUID-BC6628B5-68C6-43D7-A06E-2236A63BACD0-low.gif) Receivable "$1,000 " Contract asset $400 Revenue $600 ##### [606-10-55-291](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-291) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:35453f2492b351e05e1de289e9503751b4a061110c3adc59dfbd34f291469aa9 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An entity enters into a contract with a customer on January 1, 20X9, to transfer products to the customer for $150 per product. If the customer purchases more than 1 million products in a calendar year, the contract indicates that the price per unit is retrospectively reduced to $125 per product. ##### [606-10-55-292](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-292) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:46e58b7dd59eb91256e588000c2c04ab72367cfb7efcec76a14bca66eeb023b0 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Consideration is due when control of the products transfer to the customer. Therefore, the entity has an unconditional right to consideration (that is, a receivable) for $150 per product until the retrospective price reduction applies (that is, after 1 million products are shipped). ##### [606-10-55-293](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-293) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:548b1c3552c71203c9811dd6112de28d61325eeb8608b85a3c56a87b825acce7 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. In determining the transaction price, the entity concludes at contract inception that the customer will meet the 1 million products threshold and therefore estimates that the transaction price is $125 per product. Consequently, upon the first shipment to the customer of 100 products the entity recognizes the following. - ![](https://asc.understandingaccounting.org/asc-img/GUID-B820F84E-5FF6-4D1B-9C3F-CF2261F15422-low.gif) Receivable "$15,000 (a)" Revenue " $12,500 " (b) Refund liability " $2,500 " (a) $150 per product × 100 products (b) $125 transaction price per product × 100 products ##### [606-10-55-294](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-294) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:b1278b1f9846a4f592b57fc073dc98a7c5546d2e499afa77f0cfa1cd25c47abd Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The refund liability (see paragraph [606-10-32-10](https://asc.understandingaccounting.org/asc/606/10/#606-10-32-10)) represents a refund of $25 per product, which is expected to be provided to the customer for the volume-based rebate (that is, the difference between the $150 price stated in the contract that the entity has an unconditional right to receive and the $125 estimated transaction price). ##### [606-10-55-295](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-295) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:02024e74f26c6c5275a5521339dbd89be124d8053a9463e6f8cd0857b0b94b19 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Example 41 illustrates the guidance in paragraphs [606-10-50-5 through 50-6](https://asc.understandingaccounting.org/asc/606/10/#606-10-50-5) and [606-10-55-89 through 55-91](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-89) on the disaggregation of revenue disclosure. Examples 42 and 43 illustrate the guidance in paragraphs [606-10-50-13 through 50-15](https://asc.understandingaccounting.org/asc/606/10/#606-10-50-13) on the disclosure of the transaction price allocated to the remaining performance obligations. In addition, the following guidance is illustrated in Example 42: 1. a Paragraph [606-10-32-12](https://asc.understandingaccounting.org/asc/606/10/#606-10-32-12) on constraining estimates of variable consideration 2. b Paragraph [606-10-55-18](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-18) on methods for measuring progress toward complete satisfaction of a performance obligation. ##### [606-10-55-296](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-296) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:f895ccc100cf065bca4b9cbcac7641510141de1b04e1d542020c9c549e18c5a3 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An entity reports the following segments: consumer products, transportation, and energy, in accordance with Topic 280 on segment reporting. When the entity prepares its investor presentations, it disaggregates revenue into primary geographical markets, major product lines, and timing of revenue recognition (that is, goods transferred at a point in time or services transferred over time). ##### [606-10-55-297](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-297) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:f356a1a159d829684a959fd0fbdbca514d9e3d2430f6ad94a1a72d7ac1f7f221 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The entity determines that the categories used in the investor presentations can be used to meet the objective of the disaggregation disclosure requirement in paragraph [606-10-50-5](https://asc.understandingaccounting.org/asc/606/10/#606-10-50-5), which is to disaggregate revenue from contracts with customers into categories that depict how the nature, amount, timing, and uncertainty of revenue and cash flows are affected by economic factors. The following table illustrates the disaggregation disclosure by primary geographical market, major product line, and timing of revenue recognition, including a reconciliation of how the disaggregated revenue ties in with the consumer products, transportation, and energy segments in accordance with paragraphs [606-10-50-6](https://asc.understandingaccounting.org/asc/606/10/#606-10-50-6). - ![](https://asc.understandingaccounting.org/asc-img/GUID-6218E940-A0EA-49FB-9A52-56AE01D05B08-low.gif) Segments Consumer Products Transportation Energy Total Primary Geographical Markets North America $990 " $2,250 " " $5,250 " " $8,490 " Europe 300 750 " 1,000 " " 2,050 " Asia 700 260 - 960 " $1,990 " " $3,260 " " $6,250 " " $11,500 " Major Goods/Service Lines Office supplies $600 - - $600 Appliances 990 - - 990 Clothing 400 - - 400 Motorcycles - 500 - 500 Automobiles - " 2,760 " - " 2,760 " Solar panels - - " 1,000 " " 1,000 " Power plant - - " 5,250 " " 5,250 " " $1,990 " " $3,260 " " $6,250 " " $11,500 " Timing of Revenue Recognition Goods transferred at a point in time " $1,990 " " $3,260 " " $1,000 " " $6,250 " Services transferred over time - - " 5,250 " " 5,250 " " $1,990 " " $3,260 " " $6,250 " " $11,500 " ##### [606-10-55-298](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-298) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:e295452d60d156a50ab4e790f8ff86c29a3852fc912fc74f874edb70944b8f86 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. On June 30, 20X7, an entity enters into three contracts (Contracts A, B, and C) with separate customers to provide services. Each contract has a two-year noncancellable term. The entity considers the guidance in paragraphs [606-10-50-13 through 50-15](https://asc.understandingaccounting.org/asc/606/10/#606-10-50-13) in determining the information in each contract to be included in the disclosure of the transaction price allocated to the remaining performance obligations at December 31, 20X7. ##### [606-10-55-299](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-299) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:0ffe963b5cdb29fb4f6a6ac2eeaacb9eef84336dcba8f815a4928c5e0f381cf7 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Cleaning services are to be provided over the next two years typically at least once per month. For services provided, the customer pays an hourly rate of $25. ##### [606-10-55-300](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-300) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:7cac957366923cc6d2507a9ec2a65d7b52f8a3c2efe56309f293019f8ece1de7 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Because the entity bills a fixed amount for each hour of service provided, the entity has a right to invoice the customer in the amount that corresponds directly with the value of the entity's performance completed to date in accordance with paragraph [606-10-55-18](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-18). Consequently, the entity could elect to apply the optional exemption in paragraph [606-10-50-14(b)](https://asc.understandingaccounting.org/asc/606/10/#606-10-50-14). If the entity elects not to disclose the transaction price allocated to remaining performance obligations for Contract A, the entity would disclose that it has applied the optional exemption in paragraph [606-10-50-14(b)](https://asc.understandingaccounting.org/asc/606/10/#606-10-50-14). The entity also would disclose the nature of the performance obligation, the remaining duration, and a description of the variable consideration that has been excluded from the disclosure of remaining performance obligations in accordance with paragraph [606-10-50-15](https://asc.understandingaccounting.org/asc/606/10/#606-10-50-15). ##### [606-10-55-301](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-301) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:ff822c3b6cf7006e382e77f4de7ab1ccb8f0e97aede67b14be6e8f6a507a77fc Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Cleaning services and lawn maintenance services are to be provided as and when needed with a maximum of four visits per month over the next two years. The customer pays a fixed price of $400 per month for both services. The entity measures its progress toward complete satisfaction of the performance obligation using a time-based measure. ##### [606-10-55-302](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-302) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:42104de66d02dc662c789389c1a8f487b2a7d79c2bcbeaf69b6613411862a1cd Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The entity discloses the amount of the transaction price that has not yet been recognized as revenue in a table with quantitative time bands that illustrates when the entity expects to recognize the amount as revenue. The information for Contract B included in the overall disclosure is as follows. - ![](https://asc.understandingaccounting.org/asc-img/GUID-F60AE934-6FED-4E02-8175-915AD19CBB91-low.gif) 20X8 20X9 Total "Revenue expected to be recognized on this contract as of December 31, 20X7" " $4,800 " (a) " $2,400 " (b) " $7,200 " (a) " $4,800 = $400 × 12 months" (b) "$2,400 = $400 × 6 months" ##### [606-10-55-303](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-303) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:2c9e0a9d9f701923da197b2ed168caa8c71d928bd1a6004887b0ca12d2dd6298 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Cleaning services are to be provided as and when needed over the next two years. The customer pays fixed consideration of $100 per month plus a one-time variable consideration payment ranging from $0 - $1,000 corresponding to a one-time regulatory review and certification of the customer's facility (that is, a performance bonus). The entity estimates that it will be entitled to $750 of the variable consideration. On the basis of the entity's assessment of the factors in paragraph [606-10-32-12](https://asc.understandingaccounting.org/asc/606/10/#606-10-32-12), the entity includes its estimate of $750 of variable consideration in the transaction price because it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur. The entity measures its progress toward complete satisfaction of the performance obligation using a time-based measure. ##### [606-10-55-304](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-304) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:b10fa9b06805f7828f566f57c61665d3b92df7f8ec99f77930e056830ec17d8b Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The entity discloses the amount of the transaction price that has not yet been recognized as revenue in a table with quantitative time bands that illustrates when the entity expects to recognize the amount as revenue. The entity also includes a qualitative discussion about any significant variable consideration that is not included in the disclosure. The information for Contract C included in the overall disclosure is as follows. - ![](https://asc.understandingaccounting.org/asc-img/GUID-9206C80E-EF1C-4880-81D9-2D36B8B60669-low.gif) 20X8 20X9 Total "Revenue expected to be recognized on this contract as of December 31, 20X7" " $1,575 " (a) $788 (b) " $2,363 " (a) "Transaction price = $3,150 ($100 × 24 months + $750 variable consideration) recognized evenly over 24 months at $1,575 per year" (b) "$1,575 ÷ 2 = $788 (that is, for 6 months of the year)" ##### [606-10-55-305](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-305) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:73e85d908318b35b7024fd6add83338ef3434b1589405ea34aa65d675a578b1c Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. In addition, in accordance with paragraph [606-10-50-15](https://asc.understandingaccounting.org/asc/606/10/#606-10-50-15), the entity discloses qualitatively that part of the performance bonus has been excluded from the disclosure because it was not included in the transaction price. That part of the performance bonus was excluded from the transaction price in accordance with the guidance on constraining estimates of variable consideration. ##### [606-10-55-305A](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-305A) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:1934f327051caaa2a41f34e98f5f1bc7e93f2f56ed6bf232dcb95b6027a251fa Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The entity does not meet the criteria to apply the optional exemption in paragraph [606-10-50-14A](https://asc.understandingaccounting.org/asc/606/10/#606-10-50-14A) because the monthly consideration is fixed and the variable consideration does not meet the condition in paragraph [606-10-50-14A(b)](https://asc.understandingaccounting.org/asc/606/10/#606-10-50-14A). ##### [606-10-55-306](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-306) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:1b991ac1e8780b0584f92065ea1b0c0f6e53a13d764b64c7a8bf1131ad257ac5 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. On January 1, 20X2, an entity enters into a contract with a customer to construct a commercial building for fixed consideration of $10 million. The construction of the building is a single performance obligation that the entity satisfies over time. As of December 31, 20X2, the entity has recognized $3.2 million of revenue. The entity estimates that construction will be completed in 20X3 but it is possible that the project will be completed in the first half of 20X4. ##### [606-10-55-307](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-307) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:684cfddd8322442c0897c6c66cd90db9f02278e7745679711c30356a5d3e6ee5 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. At December 31, 20X2, the entity discloses the amount of the transaction price that has not yet been recognized as revenue in its disclosure of the transaction price allocated to the remaining performance obligations. The entity also discloses an explanation of when the entity expects to recognize that amount as revenue. The explanation can be disclosed either on a quantitative basis using time bands that are most appropriate for the duration of the remaining performance obligation or by providing a qualitative explanation. Because the entity is uncertain about the timing of revenue recognition, the entity discloses this information qualitatively as follows: - As of December 31, 20X2, the aggregate amount of the transaction price allocated to the remaining performance obligation is $6.8 million, and the entity will recognize this revenue as the building is completed, which is expected to occur over the next 12-18 months. ##### [606-10-55-308](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-308) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:7bd900989a397213d29a0f8aace1a11bef62f9f006729a3f1bea7f2f8fef2226 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Example 44 illustrates the guidance in paragraphs [606-10-55-30 through 55-35](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-30) on warranties. In addition, Example 44 illustrates the guidance in paragraphs [606-10-25-19 through 25-21](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-19) on identifying performance obligations. ##### [606-10-55-309](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-309) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:81b2d357e91a541e11333c0e93475bf2a024c43984560b4f2f1a34dc1bb674bb Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An entity, a manufacturer, provides its customer with a warranty with the purchase of a product. The warranty provides assurance that the product complies with agreed-upon specifications and will operate as promised for one year from the date of purchase. The contract also provides the customer with the right to receive up to 20 hours of training services on how to operate the product at no additional cost. The training services will help the customer optimize its use of the product in a short time frame. Therefore, although the training services are only for 20 hours and are not essential to the customer's ability to use the product, the entity determines that the training services are material in the context of the contract on the basis of the facts and circumstances of the arrangement. ##### [606-10-55-310](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-310) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:3e54b755bfe979642e51194c4560159d02d94b17c751660038d67f63c98f0829 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The entity assesses the goods and services in the contract to determine whether they are distinct and therefore give rise to separate performance obligations. ##### [606-10-55-311](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-311) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:b0ef25a3ba187cde671bff31f75442efe46b34739c8efc687cf6ea6f3417146b Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The product and training services are each capable of being distinct in accordance with paragraphs [606-10-25-19(a)](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-19) and [606-10-25-20](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-20) because the customer can benefit from the product on its own without the training services and can benefit from the training services together with the product that already has been transferred by the entity. The entity regularly sells the product separately without the training services. ##### [606-10-55-312](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-312) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:6f7d500fc715db6935410061eb2abdf9be28a1aff15f9a03d4a550226df71bba Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The entity next assesses whether its promises to transfer the product and to provide the training services are separately identifiable in accordance with paragraphs [606-10-25-19(b)](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-19) and [606-10-25-21](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-21). The entity does not provide a significant service of integrating the training services with the product (see paragraph [606-10-25-21(a)](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-21)). The training services and product do not significantly modify or customize each other (see paragraph [606-10-25-21(b)](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-21)). The product and the training services are not highly interdependent or highly interrelated as described in paragraph [606-10-25-21(c)](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-21).The entity would be able to fulfill its promise to transfer the product independent of its efforts to subsequently provide the training services and would be able to provide training services to any customer that previously acquired its product. Consequently, the entity concludes that its promise to transfer the product and its promise to provide training services are not inputs to a combined item and, therefore, are each separately identifiable. ##### [606-10-55-313](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-313) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:f907afb23bc64eb3b3ec26b404d97f2085f417037289332a1d8f0a28c55d368b Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The product and training services are each distinct in accordance with paragraph [606-10-25-19](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-19) and therefore give rise to two separate performance obligations. ##### [606-10-55-314](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-314) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:76f98970a2f55257286ed6101878ad7fe9c78c8ea8a6dba365430d05c8debcc2 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Finally, the entity assesses the promise to provide a warranty and observes that the warranty provides the customer with the assurance that the product will function as intended for one year. The entity concludes, in accordance with paragraphs [606-10-55-30 through 55-35](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-30) , that the warranty does not provide the customer with a good or service in addition to that assurance and, therefore, the entity does not account for it as a performance obligation. The entity accounts for the assurance-type warranty in accordance with the requirements on product warranties in Subtopic 460-10. ##### [606-10-55-315](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-315) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:c886fb9fa1fabfbe5c4753cf5ad424f773c074244e2698cdedeed817cfc21e88 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. As a result, the entity allocates the transaction price to the two performance obligations (the product and the training services) and recognizes revenue when (or as) those performance obligations are satisfied. ##### [606-10-55-316](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-316) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:e93dd6898672229cd3da38815d927fc546ca7da50442423457e00abc87b8f961 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Examples 45-48A illustrate the guidance in paragraphs [606-10-55-36 through 55-40](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-36) on principal versus agent considerations. ##### [606-10-55-317](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-317) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:0fe2c0ef39fcf3a3ea998ef08719ffee454eedea1d712bcc815c497fb53bbc4e Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An entity operates a website that enables customers to purchase goods from a range of suppliers who deliver the goods directly to the customers. Under the terms of the entity's contracts with suppliers, when a good is purchased via the website, the entity is entitled to a commission that is equal to 10 percent of the sales price. The entity's website facilitates payment between the supplier and the customer at prices that are set by the supplier. The entity requires payment from customers before orders are processed, and all orders are nonrefundable. The entity has no further obligations to the customer after arranging for the products to be provided to the customer. ##### [606-10-55-318](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-318) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:78eda17164356d18a4e2c81267aaeec76ece40e8511deb4be405837b351172bb Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. To determine whether the entity's performance obligation is to provide the specified goods itself (that is, the entity is a principal) or to arrange for those goods to be provided by the supplier (that is, the entity is an agent), the entity identifies the specified good or service to be provided to the customer and assesses whether it controls that good or service before the good or service is transferred to the customer. 1. a [Subparagraph superseded by Accounting Standards Update No. 2016-08](https://asc.understandingaccounting.org/updates/asu-2016-08/). 2. b [Subparagraph superseded by Accounting Standards Update No. 2016-08](https://asc.understandingaccounting.org/updates/asu-2016-08/). 3. c [Subparagraph superseded by Accounting Standards Update No. 2016-08](https://asc.understandingaccounting.org/updates/asu-2016-08/). 4. d [Subparagraph superseded by Accounting Standards Update No. 2016-08](https://asc.understandingaccounting.org/updates/asu-2016-08/). 5. e [Subparagraph superseded by Accounting Standards Update No. 2016-08](https://asc.understandingaccounting.org/updates/asu-2016-08/). ##### [606-10-55-318A](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-318A) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:26f0bb25ad17657d4603370de68dba3b16d3d7e107f528b3e93eaa4b15f0d39e Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The website operated by the entity is a marketplace in which suppliers offer their goods and customers purchase the goods that are offered by the suppliers. Accordingly, the entity observes that the specified goods to be provided to customers that use the website are the goods provided by the suppliers, and no other goods or services are promised to customers by the entity. ##### [606-10-55-318B](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-318B) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:00d10822ae3958049fba3979d3e1ff108b7878f48f0de7085e5f5c46246eff25 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The entity concludes that it does not control the specified goods before they are transferred to customers that order goods using the website. The entity does not at any time have the ability to direct the use of the goods transferred to customers. For example, it cannot direct the goods to parties other than the customer or prevent the supplier from transferring those goods to the customer. The entity does not control the suppliers' inventory of goods used to fulfill the orders placed by customers using the website. ##### [606-10-55-318C](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-318C) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:a341722685295cf5445798c7ca4869e87ab175b9c02cf6b3898d5784bdbfc338 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. As part of reaching that conclusion, the entity considers the following indicators in paragraph [606-10-55-39](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-39). The entity concludes that these indicators provide further evidence that it does not control the specified goods before they are transferred to the customers. 1. a The supplier is primarily responsible for fulfilling the promise to provide the goods to the customer. The entity is neither obliged to provide the goods if the supplier fails to transfer the goods to the customer nor responsible for the acceptability of the goods. 2. b The entity does not take inventory risk at any time before or after the goods are transferred to the customer. The entity does not commit to obtain the goods from the supplier before the goods are purchased by the customer and does not accept responsibility for any damaged or returned goods. 3. c The entity does not have discretion in establishing prices for the supplier's goods. The sales price is set by the supplier. ##### [606-10-55-319](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-319) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:92fb89bac766beda597f8c21eb96d6cd8f899bc8ab3d81eba2ae813b0086c603 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Consequently, the entity concludes that it is an agent and its performance obligation is to arrange for the provision of goods by the supplier. When the entity satisfies its promise to arrange for the goods to be provided by the supplier to the customer (which, in this example, is when goods are purchased by the customer), the entity recognizes revenue in the amount of the commission to which it is entitled. ##### [606-10-55-320](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-320) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:baed00cb950d9dfea710ee85da5f7109a01e7902dc3200041dd788ad76af9cde Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An entity enters into a contract with a customer for equipment with unique specifications. The entity and the customer develop the specifications for the equipment, which the entity communicates to a supplier that the entity contracts with to manufacture the equipment. The entity also arranges to have the supplier deliver the equipment directly to the customer. Upon delivery of the equipment to the customer, the terms of the contract require the entity to pay the supplier the price agreed to by the entity and the supplier for manufacturing the equipment. ##### [606-10-55-321](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-321) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:c47e76ab7f1cf7970209be2be8b7b535afd0975b9ece96116f46a431f222b3f6 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The entity and the customer negotiate the selling price, and the entity invoices the customer for the agreed-upon price with 30-day payment terms. The entity's profit is based on the difference between the sales price negotiated with the customer and the price charged by the supplier. ##### [606-10-55-322](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-322) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:de1ea1a9cd6bbf2519fa0dcaadf95b428455377d356f3f0fa8e3e510fd0ca3f8 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The contract between the entity and the customer requires the customer to seek remedies for defects in the equipment from the supplier under the supplier's warranty. However, the entity is responsible for any corrections to the equipment required resulting from errors in specifications. ##### [606-10-55-323](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-323) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:a609b8f5c2e91b62c106e041752c091b52e02ffe6ab1200f53de90bca9f132c8 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. To determine whether the entity's performance obligation is to provide the specified goods or services itself (that is, the entity is a principal) or to arrange for those goods or services to be provided by another party (that is, the entity is an agent), the entity identifies the specified good or service to be provided to the customer and assesses whether it controls that good or service before the good or service is transferred to the customer. 1. a [Subparagraph superseded by Accounting Standards Update No. 2016-08](https://asc.understandingaccounting.org/updates/asu-2016-08/). 2. b [Subparagraph superseded by Accounting Standards Update No. 2016-08](https://asc.understandingaccounting.org/updates/asu-2016-08/). 3. c [Subparagraph superseded by Accounting Standards Update No. 2016-08](https://asc.understandingaccounting.org/updates/asu-2016-08/). 4. d [Subparagraph superseded by Accounting Standards Update No. 2016-08](https://asc.understandingaccounting.org/updates/asu-2016-08/). 5. e [Subparagraph superseded by Accounting Standards Update No. 2016-08](https://asc.understandingaccounting.org/updates/asu-2016-08/). ##### [606-10-55-323A](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-323A) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:df85c2d258c12938ebf2b7c1513022a10dcbbd28daa1b1e6a312a6b6843c5538 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The entity concludes that it has promised to provide the customer with specialized equipment designed by the entity. Although the entity has subcontracted the manufacturing of the equipment to the supplier, the entity concludes that the design and manufacturing of the equipment are not distinct because they are not separately identifiable (that is, there is a single performance obligation). The entity is responsible for the overall management of the contract (for example, by ensuring that the manufacturing service conforms to the specifications) and thus provides a significant service of integrating those items into the combined output—the specialized equipment—for which the customer has contracted. In addition, those activities are highly interrelated. If necessary modifications to the specifications are identified as the equipment is manufactured, the entity is responsible for developing and communicating revisions to the supplier and for ensuring that any associated rework required conforms with the revised specifications. Accordingly, the entity identifies the specified good to be provided to the customer as the specialized equipment. ##### [606-10-55-323B](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-323B) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:e790495fcb1a74a7df7e9942c327417131a58d9c77a8bc949c669d2dc8e413f2 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The entity concludes that it controls the specialized equipment before that equipment is transferred to the customer (see paragraph [606-10-55-37A(c)](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-37A)). The entity provides the significant integration service necessary to produce the specialized equipment and, therefore, controls the specialized equipment before it is transferred to the customer. The entity directs the use of the supplier's manufacturing service as an input in creating the combined output that is the specialized equipment. In reaching the conclusion that it controls the specialized equipment before that equipment is transferred to the customer, the entity also observes that even though the supplier delivers the specialized equipment to the customer, the supplier has no ability to direct its use (that is, the terms of the contract between the entity and the supplier preclude the supplier from using the specialized equipment for another purpose or directing that equipment to another customer). The entity also obtains the remaining benefits from the specialized equipment by being entitled to the consideration in the contract from the customer. ##### [606-10-55-324](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-324) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:a29bea24bc9c2ca8c33e735c5b80c59b22f05d1d8c4bef3ae1c9fc790085e4cf Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Thus, the entity concludes that it is a principal in the transaction. The entity does not consider the indicators in paragraph [606-10-55-39](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-39) because the evaluation above is conclusive without consideration of the indicators. The entity recognizes revenue in the gross amount of consideration to which it is entitled from the customer in exchange for the specialized equipment. ##### [606-10-55-324A](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-324A) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:b2f2e67834cbcd47c2740d044af90e82cf1032edaf6c16f7a69061c359f94322 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An entity enters into a contract with a customer to provide office maintenance services. The entity and the customer define and agree on the scope of the services and negotiate the price. The entity is responsible for ensuring that the services are performed in accordance with the terms and conditions in the contract. The entity invoices the customer for the agreed-upon price on a monthly basis with 10-day payment terms. ##### [606-10-55-324B](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-324B) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:e81ebed5c24a66f9fc46cce37adf6193f9a0492f2d616d6738eadcde9b2be88e Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The entity regularly engages third-party service providers to provide office maintenance services to its customers. When the entity obtains a contract from a customer, the entity enters into a contract with one of those service providers, directing the service provider to perform office maintenance services for the customer. The payment terms in the contracts with the service providers generally are aligned with the payment terms in the entity's contracts with customers. However, the entity is obliged to pay the service provider even if the customer fails to pay. ##### [606-10-55-324C](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-324C) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:d9f4e521a2506a97c6e6389a5c93cc7ddfd020eae88cb4ee085db270ed2b2236 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. To determine whether the entity is a principal or an agent, the entity identifies the specified good or service to be provided to the customer and assesses whether it controls that good or service before the good or service is transferred to the customer. ##### [606-10-55-324D](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-324D) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:e7001c6297849fd7b8075878c019cbbe7913e1c1ecc5d22fa1d86eb866c74a25 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The entity observes that the specified services to be provided to the customer are the office maintenance services for which the customer contracted and that no other goods or services are promised to the customer. While the entity obtains a right to office maintenance services from the service provider after entering into the contract with the customer, that right is not transferred to the customer. That is, the entity retains the ability to direct the use of, and obtain substantially all the remaining benefits from, that right. For example, the entity can decide whether to direct the service provider to provide the office maintenance services for that customer, or for another customer, or at its own facilities. The customer does not have a right to direct the service provider to perform services that the entity has not agreed to provide. Therefore, the right to office maintenance services obtained by the entity from the service provider is not the specified good or service in its contract with the customer. ##### [606-10-55-324E](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-324E) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:4160e24a067d1b28c11d52263caf012bda8a78bd91d8c8c95f57eb190d2aff86 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The entity concludes that it controls the specified services before they are provided to the customer. The entity obtains control of a right to office maintenance services after entering into the contract with the customer but before those services are provided to the customer. The terms of the entity's contract with the service provider give the entity the ability to direct the service provider to provide the specified services on the entity's behalf (see paragraph [606-10-55-37A(b)](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-37A)). In addition, the entity concludes that the following indicators in paragraph [606-10-55-39](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-39) provide further evidence that the entity controls the office maintenance services before they are provided to the customer: 1. a The entity is primarily responsible for fulfilling the promise to provide office maintenance services. Although the entity has hired a service provider to perform the services promised to the customer, it is the entity itself that is responsible for ensuring that the services are performed and are acceptable to the customer (that is, the entity is responsible for fulfilment of the promise in the contract, regardless of whether the entity performs the services itself or engages a third-party service provider to perform the services). 2. b The entity has discretion in setting the price for the services to the customer. ##### [606-10-55-324F](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-324F) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:31b1cc1cdabeef20f7505eb8aa2d0e2a84c286f856cbb59ee190c690d7b98970 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The entity observes that it does not commit itself to obtain the services from the service provider before obtaining the contract with the customer. Thus, the entity has mitigated its inventory risk with respect to the office maintenance services. Nonetheless, the entity concludes that it controls the office maintenance services before they are provided to the customer on the basis of the evidence in paragraph [606-10-55-324E](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-324E). ##### [606-10-55-324G](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-324G) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:ade3e6ab1b750be44b90ff1617fd043dbcc9d02abac246112b13c9eeb10b4303 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Thus, the entity is a principal in the transaction and recognizes revenue in the amount of consideration to which it is entitled from the customer in exchange for the office maintenance services. ##### [606-10-55-325](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-325) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:46e9af9377656159688fd23739c77406d56d1a77c3a283984def928fcd09f4a2 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An entity negotiates with major airlines to purchase tickets at reduced rates compared with the price of tickets sold directly by the airlines to the public. The entity agrees to buy a specific number of tickets and must pay for those tickets regardless of whether it is able to resell them. The reduced rate paid by the entity for each ticket purchased is negotiated and agreed in advance. ##### [606-10-55-326](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-326) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:24390879eb7ee12d7c68b9ff7d250d34960ce734d65c425e01e33f06a489f04a Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The entity determines the prices at which the airline tickets will be sold to its customers. The entity sells the tickets and collects the consideration from customers when the tickets are purchased. ##### [606-10-55-327](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-327) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:5c503f6a101bbdef4fb41f965fef52a9876c8782a565a286a2096e5379e52a9c Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The entity also assists the customers in resolving complaints with the service provided by the airlines. However, each airline is responsible for fulfilling obligations associated with the ticket, including remedies to a customer for dissatisfaction with the service. ##### [606-10-55-328](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-328) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:5db8201a084376a74f9d909927eab3f18ee31afb17f2063f9ee3513df373dffa Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. To determine whether the entity's performance obligation is to provide the specified goods or services itself (that is, the entity is a principal) or to arrange for those goods or services to be provided by another party (that is, the entity is an agent), the entity identifies the specified good or service to be provided to the customer and assesses whether it controls that good or service before the good or service is transferred to the customer. 1. a [Subparagraph superseded by Accounting Standards Update No. 2016-08](https://asc.understandingaccounting.org/updates/asu-2016-08/). 2. b [Subparagraph superseded by Accounting Standards Update No. 2016-08](https://asc.understandingaccounting.org/updates/asu-2016-08/). 3. c [Subparagraph superseded by Accounting Standards Update No. 2016-08](https://asc.understandingaccounting.org/updates/asu-2016-08/). 4. d [Subparagraph superseded by Accounting Standards Update No. 2016-08](https://asc.understandingaccounting.org/updates/asu-2016-08/). ##### [606-10-55-328A](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-328A) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:1c2ed6edc3d669967582b1f1aee10a52d52b369d0a596f97387ab2a9bb06f361 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The entity concludes that with each ticket that it commits itself to purchase from the airline, it obtains control of a right to fly on a specified flight (in the form of a ticket) that the entity then transfers to one of its customers (see paragraph [606-10-55-37A(a)](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-37A)). Consequently, the entity determines that the specified good or service to be provided to its customer is that right (to a seat on a specific flight) that the entity controls. The entity observes that no other goods or services are promised to the customer. ##### [606-10-55-328B](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-328B) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:2644d51b58354e42aa6ed9d3f59046855999e00d15a76bd51c85ddb18c9c5219 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The entity controls the right to each flight before it transfers that specified right to one of its customers because the entity has the ability to direct the use of that right by deciding whether to use the ticket to fulfill a contract with a customer and, if so, which contract it will fulfill. The entity also has the ability to obtain the remaining benefits from that right by either reselling the ticket and obtaining all of the proceeds from the sale or, alternatively, using the ticket itself. ##### [606-10-55-328C](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-328C) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:078fa5014edb9363026a1bc47b080e20ce96cff00f32287cabfb545a965711bf Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The indicators in paragraph [606-10-55-39(b) through (c)](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-39) also provide relevant evidence that the entity controls each specified right (ticket) before it is transferred to the customer. The entity has inventory risk with respect to the ticket because the entity committed itself to obtain the ticket from the airline before obtaining a contract with a customer to purchase the ticket. This is because the entity is obliged to pay the airline for that right regardless of whether it is able to obtain a customer to resell the ticket to or whether it can obtain a favorable price for the ticket. The entity also establishes the price that the customer will pay for the specified ticket. ##### [606-10-55-329](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-329) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:3e3599f76ed194909e5ec8590bc6d9a8ae8344aaf5a47d6c90a2b7f61f3c3387 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Thus, the entity concludes that it is a principal in the transactions with customers. The entity recognizes revenue in the gross amount of consideration to which it is entitled in exchange for the tickets transferred to the customers. ##### [606-10-55-330](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-330) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:afb58d81984cf9697736879b336447a9a12919838d557b8af72588c2a6069fef Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An entity sells vouchers that entitle customers to future meals at specified restaurants, and the sales price of the voucher provides the customer with a significant discount when compared with the normal selling prices of the meals (for example, a customer pays $100 for a voucher that entitles the customer to a meal at a restaurant that would otherwise cost $200). The entity does not purchase or commit itself to purchase vouchers in advance of the sale of a voucher to a customer; instead, it purchases vouchers only as they are requested by the customers. The entity sells the vouchers through its website, and the vouchers are nonrefundable. ##### [606-10-55-331](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-331) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:cecdb71c91a8345376efe760a1e8d2b340bd039992ecc9d87884cb683ddace97 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The entity and the restaurants jointly determine the prices at which the vouchers will be sold to customers. Under the terms of its contracts with the restaurants, the entity is entitled to 30 percent of the voucher price when it sells the voucher. ##### [606-10-55-332](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-332) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:0870ba1ac0a7eaf162d89c13a2cf3689c68eeb2cb900aabd7985f8e6f0399cd5 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The entity also assists the customers in resolving complaints about the meals and has a buyer satisfaction program. However, the restaurant is responsible for fulfilling obligations associated with the voucher, including remedies to a customer for dissatisfaction with the service. ##### [606-10-55-333](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-333) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:ae854c2a6c0c4a6fcbe9eaaba941f34fecaeb41d4d07561b91584e3f35617e88 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. To determine whether the entity is a principal or an agent, the entity identifies the specified good or service to be provided to the customer and assesses whether it controls the specified good or service before that good or service is transferred to the customer. 1. a [Subparagraph superseded by Accounting Standards Update No. 2016-08](https://asc.understandingaccounting.org/updates/asu-2016-08/). 2. b [Subparagraph superseded by Accounting Standards Update No. 2016-08](https://asc.understandingaccounting.org/updates/asu-2016-08/). 3. c [Subparagraph superseded by Accounting Standards Update No. 2016-08](https://asc.understandingaccounting.org/updates/asu-2016-08/). 4. d [Subparagraph superseded by Accounting Standards Update No. 2016-08](https://asc.understandingaccounting.org/updates/asu-2016-08/). ##### [606-10-55-333A](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-333A) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:bd557bec5f7cbbf9b7f57196bf2d4a7f0b98565b31299314ae3070a6932c65e7 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. A customer obtains a voucher for the restaurant that it selects. The entity does not engage the restaurants to provide meals to customers on the entity's behalf as described in the indicator in paragraph [606-10-55-39(a)](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-39). Therefore, the entity observes that the specified good or service to be provided to the customer is the right to a meal (in the form of a voucher) at a specified restaurant or restaurants, which the customer purchases and then can use itself or transfer to another person. The entity also observes that no other goods or services (other than the vouchers) are promised to the customers. ##### [606-10-55-333B](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-333B) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:f4a732a463320acb0cbd7c236aab1611b75dde5e41a11a9dac55a72bae219a1d Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The entity concludes that it does not control the voucher (right to a meal) at any time. In reaching this conclusion, the entity principally considers the following: 1. a The vouchers are created only at the time that they are transferred to the customers and, thus, do not exist before that transfer. Therefore, the entity does not at any time have the ability to direct the use of the vouchers or obtain substantially all of the remaining benefits from the vouchers before they are transferred to customers. 2. b The entity neither purchases nor commits itself to purchase vouchers before they are sold to customers. The entity also has no responsibility to accept any returned vouchers. Therefore, the entity does not have inventory risk with respect to the vouchers as described in the indicator in paragraph [606-10-55-39(b)](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-39). ##### [606-10-55-334](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-334) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:14cf33f846663221feaa814dfba14f2f8cd1eb289c24f1bff7d04a6c50c9b8ce Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Thus, the entity concludes that it is an agent in the arrangement with respect to the vouchers. The entity recognizes revenue in the net amount of consideration to which the entity will be entitled in exchange for arranging for the restaurants to provide vouchers to customers for the restaurants' meals, which is the 30 percent commission it is entitled to upon the sale of each voucher. ##### [606-10-55-334A](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-334A) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:2dd5955b24d75e9e36ebfd5df10c7746d01cc811e54e62b9ed5121643a467487 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An entity sells services to assist its customers in more effectively targeting potential recruits for open job positions. The entity performs several services itself, such as interviewing candidates and performing background checks. As part of the contract with a customer, the customer agrees to obtain a license to access a third party's database of information on potential recruits. The entity arranges for this license with the third party, but the customer contracts directly with the database provider for the license. The entity collects payment on behalf of the third-party database provider as part of its overall invoicing to the customer. The database provider sets the price charged to the customer for the license and is responsible for providing technical support and credits to which the customer may be entitled for service down-time or other technical issues. ##### [606-10-55-334B](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-334B) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:49f66670975dfa5c1d97a849f6df22eb622e98bac9ca31f2933936855872a708 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. To determine whether the entity is a principal or an agent, the entity identifies the specified goods or services to be provided to the customer and assesses whether it controls those goods or services before they are transferred to the customer. ##### [606-10-55-334C](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-334C) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:e2f78c8815d2b3cf0cca7098fbe5dea5e14e763f943763d71409c82e7db3f243 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. For the purpose of this Example, it is assumed that the entity concludes that its recruitment services and the database access license are each distinct on the basis of its assessment of the guidance in paragraphs [606-10-25-19 through 25-22](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-19) . Accordingly, there are two specified goods or services to be provided to the customer—access to the third-party's database and recruitment services. ##### [606-10-55-334D](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-334D) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:4e77494922893507c2ab9eb09ba79aa63400c0d7fa4c3efcd9b3c9b433d1ab5d Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The entity concludes that it does not control the access to the database before it is provided to the customer. The entity does not at any time have the ability to direct the use of the license because the customer contracts for the license directly with the database provider. The entity does not control access to the provider's database—it cannot, for example, grant access to the database to a party other than the customer or prevent the database provider from providing access to the customer. ##### [606-10-55-334E](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-334E) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:a2e7c1279bafd4f50a5de30e6d092eb975fa9ef9cb2498fd6311231c2a83aa91 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. As part of reaching that conclusion, the entity also considers the indicators in paragraph [606-10-55-39](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-39). The entity concludes that these indicators provide further evidence that it does not control access to the database before that access is provided to the customer. 1. a The entity is not responsible for fulfilling the promise to provide the database access service. The customer contracts for the license directly with the third-party database provider, and the database provider is responsible for the acceptability of the database access (for example, by providing technical support or service credits). 2. b The entity does not have inventory risk because it does not purchase or commit to purchase the database access before the customer contracts for database access directly with the database provider. 3. c The entity does not have discretion in setting the price for the database access with the customer because the database provider sets that price. ##### [606-10-55-334F](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-334F) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:0407e39b22d94b6410b0bc1ec479e6effcaf1d8bb91451ba60f26da3e891ba41 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Thus, the entity concludes that it is an agent in relation to the third-party's database service. In contrast, the entity concludes that it is the principal in relation to the recruitment services because the entity performs those services itself and no other party is involved in providing those services to the customer. ##### [606-10-55-335](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-335) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:09c527e4ddb7e70050e41aa3f6eb9529b3468f18bdc8e5d90a8044bb2cf257e5 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Examples 49-52 illustrate the guidance in paragraphs [606-10-55-41 through 55-45](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-41) on customer options for additional goods or services. Example 50 illustrates the guidance in paragraphs [606-10-25-19 through 25-21](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-19) on identifying performance obligations. Example 52 illustrates a customer loyalty program. That Example may not apply to all customer loyalty arrangements because the terms and conditions may differ. In particular, when there are more than two parties to the arrangement, an entity should consider all facts and circumstances to determine the customer in the transaction that gives rise to the award credits. ##### [606-10-55-336](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-336) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:f966273713f78ebbec74c78e6771d7070e854915f23da9d4ad4f2f26eeee4c0b Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An entity enters into a contract for the sale of Product A for $100. As part of the contract, the entity gives the customer a 40 percent discount voucher for any future purchases up to $100 in the next 30 days. The entity intends to offer a 10 percent discount on all sales during the next 30 days as part of a seasonal promotion. The 10 percent discount cannot be used in addition to the 40 percent discount voucher. ##### [606-10-55-337](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-337) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:bf9f133ca639c16282629921be019bbcd617ae25228912e44f6573b886a844cc Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Because all customers will receive a 10 percent discount on purchases during the next 30 days, the only discount that provides the customer with a material right is the discount that is incremental to that 10 percent (that is, the additional 30 percent discount). The entity accounts for the promise to provide the incremental discount as a performance obligation in the contract for the sale of Product A. ##### [606-10-55-338](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-338) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:f2e3cda7567911afa7d6a73128834bc190c75a02e7d75ade3b4b13ecf7bee4ef Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. To estimate the standalone selling price of the discount voucher in accordance with paragraph [606-10-55-44](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-44), the entity estimates an 80 percent likelihood that a customer will redeem the voucher and that a customer will, on average, purchase $50 of additional products. Consequently, the entity's estimated standalone selling price of the discount voucher is $12 ($50 average purchase price of additional products × 30 percent incremental discount × 80 percent likelihood of exercising the option). The standalone selling prices of Product A and the discount voucher and the resulting allocation of the $100 transaction price are as follows: - ![](https://asc.understandingaccounting.org/asc-img/GUID-02F74E4A-D215-41B7-A9AF-1053FD916068-low.gif) Performance Obligation "Standalone Selling Price" Product A $100 Discount voucher 12 Total $112 Performance Obligation Allocated Transaction Price Product A $89 ($100 ÷ $112 × $100) Discount voucher 11 ($12 ÷ $112 × $100) Total $100 ##### [606-10-55-339](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-339) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:ab1d0cb936306a3c0f4e7d2e296b5a234fd828db98ef70e111ec3ac31c8c78af Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The entity allocates $89 to Product A and recognizes revenue for Product A when control transfers. The entity allocates $11 to the discount voucher and recognizes revenue for the voucher when the customer redeems it for goods or services or when it expires. ##### [606-10-55-340](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-340) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:9a3cc9b880522b43294c08d216c062dfa1cc25c8b29d62a6efca2c110848cfef Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An entity in the telecommunications industry enters into a contract with a customer to provide a handset and monthly network service for two years. The network service includes up to 1,000 call minutes and 1,500 text messages each month for a fixed monthly fee. The contract specifies the price for any additional call minutes or texts that the customer may choose to purchase in any month. The prices for those services are equal to their standalone selling prices. ##### [606-10-55-341](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-341) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:520b4823118a69badc86d837af24cb3287f737ea9f40d2cc706c1ed7b0d93108 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The entity determines that the promises to provide the handset and network service are each separate performance obligations. This is because the customer can benefit from the handset and network service either on their own or together with other resources that are readily available to the customer in accordance with the criterion in paragraph [606-10-25-19(a)](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-19). In addition, the handset and network service are separately identifiable in accordance with the criterion in paragraph [606-10-25-19(b)](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-19) (on the basis of the factors in paragraph [606-10-25-21](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-21)). ##### [606-10-55-342](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-342) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:332bd35137ff843c11b3182fcd9e8ca5a2936949655865d1d016ad1f19681d47 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The entity determines that the option to purchase the additional call minutes and texts does not provide a material right that the customer would not receive without entering into the contract (see paragraph [606-10-55-43](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-43)). This is because the prices of the additional call minutes and texts reflect the standalone selling prices for those services. Because the option for additional call minutes and texts does not grant the customer a material right, the entity concludes it is not a performance obligation in the contract. Consequently, the entity does not allocate any of the transaction price to the option for additional call minutes or texts. The entity will recognize revenue for the additional call minutes or texts if and when the entity provides those services. ##### [606-10-55-343](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-343) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:6dc1930fe01cad18cf70a0d19854a7f2d7e7d3f24f8e6708e14cdcc2966ff874 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An entity enters into 100 separate contracts with customers to provide 1 year of maintenance services for $1,000 per contract. The terms of the contracts specify that at the end of the year, each customer has the option to renew the maintenance contract for a second year by paying an additional $1,000. Customers who renew for a second year also are granted the option to renew for a third year for $1,000. The entity charges significantly higher prices for maintenance services to customers that do not sign up for the maintenance services initially (that is, when the products are new). That is, the entity charges $3,000 in Year 2 and $5,000 in Year 3 for annual maintenance services if a customer does not initially purchase the service or allows the service to lapse. ##### [606-10-55-344](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-344) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:300c0b96ff0da50e542642808bd35355464fc1167c0503085d26bb32ffd2aa0a Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The entity concludes that the renewal option provides a material right to the customer that it would not receive without entering into the contract because the price for maintenance services are significantly higher if the customer elects to purchase the services only in Year 2 or 3. Part of each customer's payment of $1,000 in the first year is, in effect, a nonrefundable prepayment of the services to be provided in a subsequent year. Consequently, the entity concludes that the promise to provide the option is a performance obligation. ##### [606-10-55-345](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-345) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:ab05e0e499164113afdd54f359613f8907f7e21e898bd84f6ceafaff2b3b6022 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The renewal option is for a continuation of maintenance services, and those services are provided in accordance with the terms of the existing contract. Instead of determining the standalone selling prices for the renewal options directly, the entity allocates the transaction price by determining the consideration that it expects to receive in exchange for all the services that it expects to provide in accordance with paragraph [606-10-55-45](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-45). ##### [606-10-55-346](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-346) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:abbee534d573253d77499201915c134698f670e0db7900f204c200cf146c7c4d Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The entity expects 90 customers to renew at the end of Year 1 (90 percent of contracts sold) and 81 customers to renew at the end of Year 2 (90 percent of the 90 customers that renewed at the end of Year 1 will also renew at the end of Year 2, that is 81 percent of contracts sold). ##### [606-10-55-347](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-347) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:4c4f03369e6fda3e3135d9494002cfd183fd3d5304358c9391bd0bd170daecc4 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. At contract inception, the entity determines the expected consideration for each contract is $2,710 \[$1,000 + (90 percent × $1,000) + (81 percent × $1,000)\]. The entity also determines that recognizing revenue on the basis of costs incurred relative to the total expected costs depicts the transfer of services to the customer. Estimated costs for a three-year contract are as follows: - ![](https://asc.understandingaccounting.org/asc-img/GUID-15B8994F-95AA-409D-8E88-78C6CD6C8FAA-low.gif) Year 1 $600 Year 2 $750 Year 3 " $1,000 " ##### [606-10-55-348](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-348) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:d0b628767cd8d811ec26b2d1a5abed307e3711f5eb770811bf7257cb880ddca8 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Accordingly, the pattern of revenue recognition expected at contract inception for each contract is as follows: - ![](https://asc.understandingaccounting.org/asc-img/GUID-E82DE952-50C8-4DB8-9B68-F1BFF5E6F702-low.gif) Expected Costs Adjusted for Likelihood of Contract Renewal Allocation of Consideration Expected Year 1 $600 ($600 × 100%) $780 "\[($600 ÷ $2,085) × $2,710\]" Year 2 675 ($750 × 90%) 877 "\[($675 ÷ $2,085) × $2,710\]" Year 3 810 "($1,000 × 81%)" " 1,053 " "\[($810 ÷ $2,085) × $2,710\]" Total " $2,085 " " $2,710 " ##### [606-10-55-349](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-349) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:ae9907a0898d22922559bb148e175d98b15fad60a482ac16f06d6ddaa1c5cefc Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Consequently, at contract inception, the entity allocates to the option to renew at the end of Year 1 $22,000 of the consideration received to date \[cash of $100,000 - revenue to be recognized in Year 1 of $78,000 ($780 × 100)\]. ##### [606-10-55-350](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-350) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:f47b8060292e7ac8e46fe1dff09ae7a10c71a3b7e006f561a86ecf17f9cd3057 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Assuming there is no change in the entity's expectations and the 90 customers renew as expected, at the end of the first year, the entity has collected cash of $190,000 \[(100 × $1,000) + (90 × $1,000)\], has recognized revenue of $78,000 ($780 × 100), and has recognized a contract liability of $112,000. ##### [606-10-55-351](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-351) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:374b1c10509806570945ce394b36bdb7b026480e60b9fe02ee386854393d9f69 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Consequently, upon renewal at the end of the first year, the entity allocates $24,300 to the option to renew at the end of Year 2 \[cumulative cash of $190,000 - cumulative revenue recognized in Year 1 and to be recognized in Year 2 of $165,700 ($78,000 + $877 × 100)\]. ##### [606-10-55-352](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-352) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:e9483932b0f090867baae2eca05459ca3019808f1b03f11cd852360023a3e49c Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If the actual number of contract renewals was different than what the entity expected, the entity would update the transaction price and the revenue recognized accordingly. ##### [606-10-55-353](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-353) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:02402746383b65d12571a340ea874066d73c05964f5727426d1b16af6bd44a7d Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An entity has a customer loyalty program that rewards a customer with 1 customer loyalty point for every $10 of purchases. Each point is redeemable for a $1 discount on any future purchases of the entity's products. During a reporting period, customers purchase products for $100,000 and earn 10,000 points that are redeemable for future purchases. The consideration is fixed, and the standalone selling price of the purchased products is $100,000. The entity expects 9,500 points to be redeemed. The entity estimates a standalone selling price of $0.95 per point (totalling $9,500) on the basis of the likelihood of redemption in accordance with paragraph [606-10-55-44](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-44). ##### [606-10-55-354](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-354) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:3071ec22d3a9692474957c22662635a770f34f4d5b342920471da0f2ff3d1975 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The points provide a material right to customers that they would not receive without entering into a contract. Consequently, the entity concludes that the promise to provide points to the customer is a performance obligation. The entity allocates the transaction price ($100,000) to the product and the points on a relative standalone selling price basis as follows: - ![](https://asc.understandingaccounting.org/asc-img/GUID-203DCC73-1896-4B8C-9059-C2E87B7B9CD8-low.gif) Product "$91,324 \[$100,000 × ($100,000 standalone selling price ÷ $109,500)\]" Points "$8,676 \[$100,000 × ($9,500 standalone selling price ÷ $109,500)\]" ##### [606-10-55-355](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-355) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:76fdba9e79e7032f7dcae2f4b7f473370778bc4767124603517e720817769b4f Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. At the end of the first reporting period, 4,500 points have been redeemed, and the entity continues to expect 9,500 points to be redeemed in total. The entity recognizes revenue for the loyalty points of $4,110 \[(4,500 points ÷ 9,500 points) × $8,676\] and recognizes a contract liability of $4,566 ($8,676 - $ 4,110) for the unredeemed points at the end of the first reporting period. ##### [606-10-55-356](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-356) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:ffef43a4964850e68ed812990df32ee8257933b09250511e4e8fc7177fa7c20a Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. At the end of the second reporting period, 8,500 points have been redeemed cumulatively. The entity updates its estimate of the points that will be redeemed and now expects that 9,700 points will be redeemed. The entity recognizes revenue for the loyalty points of $3,493 {\[(8,500 total points redeemed ÷ 9,700 total points expected to be redeemed) × $8,676 initial allocation\] - $4,110 recognized in the first reporting period}. The contract liability balance is $1,073 ($8,676 initial allocation - $7,603 of cumulative revenue recognized). ##### [606-10-55-357](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-357) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:4d359d63c50f5be7280e811d197871aa8619955792f2b9f175a08203139bb7bf Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Example 53 illustrates the guidance in paragraphs [606-10-55-50 through 55-53](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-50) on nonrefundable upfront fees. ##### [606-10-55-358](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-358) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:6c5f8c099115fa172eac9525c3b6eab8107ead592a6997ae0fb1f9dbc52c5197 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An entity enters into a contract with a customer for one year of transaction processing services. The entity's contracts have standard terms that are the same for all customers. The contract requires the customer to pay an upfront fee to set up the customer on the entity's systems and processes. The fee is a nominal amount and is nonrefundable. The customer can renew the contract each year without paying an additional fee. ##### [606-10-55-359](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-359) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:3c9ce86c0c23c1de39bf325017a34b0377a1e28a877e67168c6c3309a16d1fd4 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The entity's setup activities do not transfer a good or service to the customer and, therefore, do not give rise to a performance obligation. ##### [606-10-55-360](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-360) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:b2628191f32010b3e068a84637549141cda7814bc8f186bc46ae778d2726064f Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The entity concludes that the renewal option does not provide a material right to the customer that it would not receive without entering into that contract (see paragraph [606-10-55-42](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-42)). The upfront fee is, in effect, an advance payment for the future transaction processing services. Consequently, the entity determines the transaction price, which includes the nonrefundable upfront fee, and recognizes revenue for the transaction processing services as those services are provided in accordance with paragraph [606-10-55-51](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-51). ##### [606-10-55-361](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-361) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:d54f82d230b6ae0e7802088ae77b927b7560f3f407e446d5e59a05b68078410d Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Examples 54-61B illustrate the guidance in paragraphs [606-10-25-14 through 25-22](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-14) on identifying performance obligations and paragraphs [606-10-55-54 through 55-60](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-54) and [606-10-55-62 through 55-65B](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-62) on licensing. These Examples also illustrate other guidance as follows: 1. a Paragraphs [606-10-25-31 through 25-37](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-31) on measuring progress toward complete satisfaction of a performance obligation (Examples 57 and 58) 2. b Paragraphs [606-10-32-39 through 32-41](https://asc.understandingaccounting.org/asc/606/10/#606-10-32-39) on allocating variable consideration to performance obligations (Example 57) 3. c Paragraphs [606-10-55-65 through 55-65B](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-65) on consideration in the form of sales-based or usage-based royalties on licenses of intellectual property (Examples 57 and 61). ##### [606-10-55-362](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-362) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:b6717a91c3b18b6851df0583adcbcdaf68d4b1f664ac6b4dd26f0d7c0ec6316a Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Using the same facts as in Case A in Example 11 (see paragraphs [606-10-55-141 through 55-145](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-141) ), the entity identifies four performance obligations in a contract: 1. a The software license 2. b Installation services 3. c Software updates 4. d Technical support. ##### [606-10-55-363](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-363) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:3a0fc8ffd4f9e9f751d357872cea6a4b66f5b4f60d28b16442699575fcb66961 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The entity assesses the nature of its promise to transfer the software license. The entity first concludes that the software to which the customer obtains rights as a result of the license is functional intellectual property. This is because the software has significant standalone functionality from which the customer can derive substantial benefit regardless of the entity's ongoing business activities. ##### [606-10-55-363A](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-363A) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:68f0d32feebc56f9350f79db387d6394a610091d61644ab4913bbdc1f8b56c61 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The entity further concludes that while the functionality of the underlying software is expected to change during the license period as a result of the entity's continued development efforts, the functionality of the software to which the customer has rights (that is, the customer's instance of the software) will change only as a result of the entity's promise to provide when-and-if available software updates. Because the entity's promise to provide software updates represents an additional promised service in the contract, the entity's activities to fulfill that promised service are not considered in evaluating the criteria in paragraph [606-10-55-62](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-62). The entity further notes that the customer has the right to install, or not install, software updates when they are provided such that the criterion in [606-10-55-62(b)](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-62) would not be met even if the entity's activities to develop and provide software updates had met the criterion in paragraph [606-10-55-62(a)](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-62). ##### [606-10-55-363B](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-363B) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:c0b6a523396f9ac6c984d93b96f5687fa653d959ca1e2d6b25d33fff364f9931 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Therefore, the entity concludes that it has provided the customer with a right to use its software as it exists at the point in time the license is granted and the entity accounts for the software license performance obligation as a performance obligation satisfied at a point in time. The entity recognizes revenue on the software license performance obligation in accordance with paragraphs [606-10-55-58B through 55-58C](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-58B) . ##### [606-10-55-364](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-364) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:688eda07870f906545bc483465b121ed22c92d32d7ff73e9c3a38aab4850129e Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An entity enters into a contract with a customer to license (for a period of three years) intellectual property related to the design and production processes for a good. The contract also specifies that the customer will obtain any updates to that intellectual property for new designs or production processes that may be developed by the entity. The updates are integral to the customer's ability to derive benefit from the license during the license period because the intellectual property is used in an industry in which technologies change rapidly. ##### [606-10-55-365](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-365) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:9c3aee5e21a4b674ba9cb4a1e768a1a7a072619737658af914dfb29f7935b59f Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The entity assesses the goods and services promised to the customer to determine which goods and services are distinct in accordance with paragraph [606-10-25-19](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-19). The entity determines that the customer can benefit from (a) the license on its own without the updates and (b) the updates together with the initial license. Although the benefit the customer can derive from the license on its own (that is, without the updates) is limited because the updates are integral to the customer's ability to continue to use the intellectual property in an industry in which technologies change rapidly, the license can be used in a way that generates some economic benefits. Therefore, the criterion in paragraph [606-10-25-19(a)](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-19) is met for the license and the updates. ##### [606-10-55-365A](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-365A) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:3b48dc942e204955512298245fa127f2fcd9a2aff9e067b899ea4cfaeee53a3c Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The fact that the benefit the customer can derive from the license on its own (that is, without the updates) is limited (because the updates are integral to the customer's ability to continue to use the license in the rapidly changing technological environment) also is considered in assessing whether the criterion in paragraph [606-10-25-19(b)](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-19) is met. Because the benefit that the customer could obtain from the license over the three-year term without the updates would be significantly limited, the entity's promises to grant the license and to provide the expected updates are, in effect, inputs that, together fulfill a single promise to deliver a combined item to the customer. That is, the nature of the entity's promise in the contract is to provide ongoing access to the entity's intellectual property related to the design and production processes for a good for the three-year term of the contract. The promises within that combined item (that is, to grant the license and to provide when-and-if available updates) are therefore not separately identifiable in accordance with the criterion in paragraph [606-10-25-19(b)](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-19). ##### [606-10-55-366](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-366) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:5d86b7c3fdff83682183168babb225a7867266b25ecbb3c456b7b66ab1db54fd Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The nature of the combined good or service that the entity promised to transfer to the customer is ongoing access to the entity's intellectual property related to the design and production processes for a good for the three-year term of the contract. Based on this conclusion, the entity applies paragraphs [606-10-25-23 through 25-30](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-23) to determine whether the single performance obligation is satisfied at a point in time or over time and paragraphs [606-10-25-31 through 25-37](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-31) to determine the appropriate method for measuring progress toward complete satisfaction of the performance obligation. The entity concludes that because the customer simultaneously receives and consumes the benefits of the entity's performance as it occurs, the performance obligation is satisfied over time in accordance with paragraph [606-10-25-27(a)](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-27)and that a time-based input measure of progress is appropriate because the entity expects, on the basis of its relevant history with similar contracts, to expend efforts to develop and transfer updates to the customer on a generally even basis throughout the three-year term. ##### [606-10-55-367](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-367) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:321ecd261b9b0777685a4ba5b3c72aef489557522993cc235cde4df30ed35af9 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An entity, a pharmaceutical company, licenses to a customer its patent rights to an approved drug compound for 10 years and also promises to manufacture the drug for the customer for 5 years, while the customer develops its own manufacturing capability. The drug is a mature product; therefore, there is no expectation that the entity will undertake activities to change the drug (for example, to alter its chemical composition). There are no other promised goods or services in the contract. ##### [606-10-55-368](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-368) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:0af4160f38df8f50551b83f4fb237c09751587d48a047dfd2e1fe9628fa54e1c Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. In this case, no other entity can manufacture this drug while the customer learns the manufacturing process and builds its own manufacturing capability because of the highly specialized nature of the manufacturing process. As a result, the license cannot be purchased separately from the manufacturing service. ##### [606-10-55-369](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-369) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:afe9e9e17c3241ffffa7d1206c2311c58539a852565ff60491108d33067b2bd9 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The entity assesses the goods and services promised to the customer to determine which goods and services are distinct in accordance with paragraph [606-10-25-19](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-19). The entity determines that the customer cannot benefit from the license without the manufacturing service; therefore, the criterion in paragraph [606-10-25-19(a)](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-19) is not met. Consequently, the license and the manufacturing service are not distinct, and the entity accounts for the license and the manufacturing service as a single performance obligation. ##### [606-10-55-370](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-370) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:c55dc39b869f338d51f97dfc29c781a48b72c85fb98adc26bb2770d02487c279 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The nature of the combined good or service for which the customer contracted is a sole sourced supply of the drug for the first five years; the customer benefits from the license only as a result of having access to a supply of the drug. After the first five years, the customer retains solely the right to use the entity's functional intellectual property (see Case B, paragraph [606-10-55-373](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-373)), and no further performance is required of the entity during Years 6-10. The entity applies paragraphs [606-10-25-23 through 25-30](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-23) to determine whether the single performance obligation (that is, the bundle of the license and the manufacturing service) is a performance obligation satisfied at a point in time or over time. Regardless of the determination reached in accordance with paragraphs [606-10-25-23 through 25-30](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-23) , the entity's performance under the contract will be complete at the end of Year 5. ##### [606-10-55-371](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-371) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:76fe1c1f9390f0deb27c4ade8518ceb497522208bb703804b919f0ef1202bf34 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. In this case, the manufacturing process used to produce the drug is not unique or specialized, and several other entities also can manufacture the drug for the customer. ##### [606-10-55-372](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-372) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:780157d9124bf1b43459adafa53afdaa0898db8c8a53e33c4308c044d87a3bd9 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The entity assesses the goods and services promised to the customer to determine which goods and services are distinct, and it concludes that the criteria in paragraph [606-10-25-19](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-19) are met for each of the license and the manufacturing service. The entity concludes that the criterion in paragraph [606-10-25-19(a)](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-19) is met because the customer can benefit from the license together with readily available resources other than the entity's manufacturing service (that is, because there are other entities that can provide the manufacturing service) and can benefit from the manufacturing service together with the license transferred to the customer at the start of the contract. ##### [606-10-55-372A](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-372A) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:570d72adf017344c829c3485de5cd1326f15dc83ef4ffa352bd8434fd0acb672 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The entity also concludes that its promises to grant the license and to provide the manufacturing service are separately identifiable (that is, the criterion in paragraph [606-10-25-19(b)](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-19) is met). The entity concludes that the license and the manufacturing service are not inputs to a combined item in this contract on the basis of the principle and the factors in paragraph [606-10-25-21](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-21). In reaching this conclusion, the entity considers that the customer could separately purchase the license without significantly affecting its ability to benefit from the license. Neither the license nor the manufacturing service is significantly modified or customized by the other, and the entity is not providing a significant service of integrating those items into a combined output. The entity further considers that the license and the manufacturing service are not highly interdependent or highly interrelated because the entity would be able to fulfill its promise to transfer the license independent of fulfilling its promise to subsequently manufacture the drug for the customer. Similarly, the entity would be able to manufacture the drug for the customer even if the customer had previously obtained the license and initially utilized a different manufacturer. Thus, although the manufacturing service necessarily depends on the license in this contract (that is, the entity would not contract for the manufacturing service without the customer having obtained the license), the license and the manufacturing service do not significantly affect each other. Consequently, the entity concludes that its promises to grant the license and to provide the manufacturing service are distinct and that there are two performance obligations: 1. a License of patent rights 2. b Manufacturing service. ##### [606-10-55-373](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-373) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:4cc523fa6b0990f0680dda63711270b8a6eedaa77b5ada3414fac37a78a926fd Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The entity assesses the nature of its promise to grant the license. The entity concludes that the patented drug formula is functional intellectual property (that is, it has significant standalone functionality in the form of its ability to treat a disease or condition). There is no expectation that the entity will undertake activities to change the functionality of the drug formula during the license period. Because the intellectual property has significant standalone functionality, any other activities the entity might undertake (for example, promotional activities like advertising or activities to develop other drug products) would not significantly affect the utility of the licensed intellectual property. Consequently, the nature of the entity's promise in transferring the license is to provide a right to use the entity's functional intellectual property, and it accounts for the license as a performance obligation satisfied at a point in time. The entity recognizes revenue for the license performance obligation in accordance with paragraphs [606-10-55-58B through 55-58C](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-58B) . ##### [606-10-55-374](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-374) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:a1a37c7720c52a02e907e7d863e24d7bfc1d8abe4264583bae0739b15d21a65f Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. In its assessment of the nature of the license, the entity does not consider the manufacturing service because it is an additional promised service in the contract. The entity applies paragraphs [606-10-25-23 through 25-30](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-23) to determine whether the manufacturing service is a performance obligation satisfied at a point in time or over time. ##### [606-10-55-375](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-375) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:e411146d6d6209586caf3c847cc9f45c007a25c6c6e0615d8fa68c4dfb04abda Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An entity enters into a contract with a customer and promises to grant a franchise license that provides the customer with the right to use the entity's trade name and sell the entity's products for 10 years. In addition to the license, the entity also promises to provide the equipment necessary to operate a franchise store. In exchange for granting the license, the entity receives a fixed fee of $1 million, as well as a sales-based royalty of 5 percent of the customer's sales for the term of the license. The fixed consideration for the equipment is $150,000 payable when the equipment is delivered. ##### [606-10-55-376](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-376) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:51711837bbb58966dc457b8272824906124d19d106deca3c6bc23434bc1cf7d5 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The entity assesses the goods and services promised to the customer to determine which goods and services are distinct in accordance with paragraph [606-10-25-19](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-19). The entity observes that the entity, as a franchisor, has developed a customary business practice to undertake activities such as analyzing the consumers' changing preferences and implementing product improvements, pricing strategies, marketing campaigns, and operational efficiencies to support the franchise name. However, the entity concludes that these activities do not directly transfer goods or services to the customer. ##### [606-10-55-377](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-377) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:170907331419322921e94779b479002bfd959e8865008f6700befac9fcf86c65 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The entity determines that it has two promises to transfer goods or services: a promise to grant a license and a promise to transfer equipment. In addition, the entity concludes that the promise to grant the license and the promise to transfer the equipment are each distinct. This is because the customer can benefit from each good or service (that is, the license and the equipment) on its own or together with other resources that are readily available (see paragraph [606-10-25-19(a)](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-19)). The customer can benefit from the license together with the equipment that is delivered before the opening of the franchise, and the equipment can be used in the franchise or sold for an amount other than scrap value. The entity also determines that the promises to grant the franchise license and to transfer the equipment are separately identifiable in accordance with the criterion in paragraph [606-10-25-19(b)](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-19). The entity concludes that the license and the equipment are not inputs to a combined item (that is, they are not fulfilling what is, in effect, a single promise to the customer). In reaching this conclusion, the entity considers that it is not providing a significant service of integrating the license and the equipment into a combined item (that is, the licensed intellectual property is not a component of, and does not significantly modify, the equipment). Additionally, the license and the equipment are not highly interdependent or highly interrelated because the entity would be able to fulfill each promise (that is, to license the franchise or to transfer the equipment) independently of the other. Consequently, the entity has two performance obligations: 1. a The franchise license 2. b The equipment. ##### [606-10-55-378](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-378) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:eb393c5e884399f584c6ebd7d2551fc6b15288bae75793a04dfadc2ad16f5c4b Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The entity determines that the transaction price includes fixed consideration of $1,150,000 and variable consideration (5 percent of the customer's sales from the franchise store). The standalone selling price of the equipment is $150,000 and the entity regularly licenses franchises in exchange for 5 percent of customer sales and a similar upfront fee. ##### [606-10-55-379](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-379) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:1553a08b8c13c4883e1f45c2a31debbc8fe905faaa0102ed8332605fdd8b2e47 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The entity applies paragraph [606-10-32-40](https://asc.understandingaccounting.org/asc/606/10/#606-10-32-40) to determine whether the variable consideration should be allocated entirely to the performance obligation to transfer the franchise license. The entity concludes that the variable consideration (that is, the sales-based royalty) should be allocated entirely to the franchise license because the variable consideration relates entirely to the entity's promise to grant the franchise license. In addition, the entity observes that allocating $150,000 to the equipment and allocating the sales-based royalty (as well as the additional $1 million in fixed consideration) to the franchise license would be consistent with an allocation based on the entity's relative standalone selling prices in similar contracts. Consequently, the entity concludes that the variable consideration (that is, the sales-based royalty) should be allocated entirely to the performance obligation to grant the franchise license. ##### [606-10-55-380](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-380) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:e0144fc76ae06c3adfd98405bba4082d974a4a3687f26efa2968c73c75def7e0 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The entity assesses the nature of the entity's promise to grant the franchise license. The entity concludes that the nature of its promise is to provide a right to access the entity's symbolic intellectual property. The trade name and logo have limited standalone functionality; the utility of the products developed by the entity is derived largely from the products' association with the franchise brand. Substantially all of the utility inherent in the trade name, logo, and product rights granted under the license stems from the entity's past and ongoing activities of establishing, building, and maintaining the franchise brand. The utility of the license is its association with the franchise brand and the related demand for its products. 1. a [Subparagraph superseded by Accounting Standards Update No. 2016-10](https://asc.understandingaccounting.org/updates/asu-2016-10/). 2. b [Subparagraph superseded by Accounting Standards Update No. 2016-10](https://asc.understandingaccounting.org/updates/asu-2016-10/). 3. c [Subparagraph superseded by Accounting Standards Update No. 2016-10](https://asc.understandingaccounting.org/updates/asu-2016-10/). ##### [606-10-55-381](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-381) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:cab6ca31edeb01db941f51f4d6847565f8168ea6a3ddef49e5462ced13eccfdb Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The entity is granting a license to symbolic intellectual property. Consequently, the license provides the customer with a right to access the entity's intellectual property and the entity's performance obligation to transfer the license is satisfied over time in accordance with paragraph [606-10-55-58A](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-58A). The entity recognizes the fixed consideration allocable to the license performance obligation in accordance with paragraph [606-10-55-58A](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-58A) and paragraph [606-10-55-58C](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-58C). This includes applying paragraphs [606-10-25-31 through 25-37](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-31) to identify the method that best depicts the entity's performance in satisfying the license (see paragraph [606-10-55-382](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-382)). ##### [606-10-55-382](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-382) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:41daf8d0cc198c0198d8ce6baf651553e20bdd97be94ea817ce6b44c1f74e0b0 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Because the consideration that is in the form of a sales-based royalty relates specifically to the franchise license (see paragraph [606-10-55-379](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-379)), the entity applies paragraph [606-10-55-65](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-65)in recognizing that consideration as revenue. Consequently, the entity recognizes revenue from the sales-based royalty as and when the sales occur. The entity concludes that recognizing revenue resulting from the sales-based royalty when the customer's subsequent sales occur is consistent with the guidance in paragraph [606-10-55-65(b)](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-65). That is, the entity concludes that ratable recognition of the fixed $1 million franchise fee plus recognition of the periodic royalty fees as the customer's subsequent sales occur reasonably depict the entity's performance toward complete satisfaction of the franchise license performance obligation to which the sales-based royalty has been allocated. ##### [606-10-55-383](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-383) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:949f998c1488f6fa5feeb2f052437be24e23cbad846bb9e4e26429900dda0d03 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An entity, a creator of comic strips, licenses the use of the images and names of its comic strip characters in three of its comic strips to a customer for a four-year term. There are main characters involved in each of the comic strips. However, newly created characters appear and disappear regularly and the images of the characters evolve over time. The customer, an operator of cruise ships, can use the entity's characters in various ways, such as in shows or parades, within reasonable guidelines. ##### [606-10-55-384](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-384) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:02d23b3c59f537b25f333948f7707711b5c663f68f6c3ec2f1e066d847441d6a Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. In exchange for granting the license, the entity receives a fixed payment of $1 million in each year of the 4-year term. ##### [606-10-55-385](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-385) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:840deea9a997dabd919b857b9fff373017487cafdfe85cf0ed6f40ba8b78fa00 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The entity concludes that it has made no other promises to the customer other than the promise to grant a license. That is, the additional activities associated with the license do not directly transfer a good or service to the customer. Therefore, the entity concludes that its only performance obligation is to transfer the license. ##### [606-10-55-386](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-386) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:32bf2563876a221ab98e7612a1b24da140681c585424e1537444a68a181a03fc Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The entity assesses the nature of its promise to transfer the license and concludes that the nature of its promise is to grant the customer the right to access the entity's symbolic intellectual property. The entity determines that the licensed intellectual property (that is, the character names and images) is symbolic because it has no standalone functionality (the names and images cannot process a transaction, perform a function or task, or be played or aired separate from significant additional production that would, for example, use the images to create a movie or a show) and the utility of those names and images is derived from the entity's past and ongoing activities such as producing the weekly comic strip that includes the characters. 1. a [Subparagraph superseded by Accounting Standards Update No. 2016-10](https://asc.understandingaccounting.org/updates/asu-2016-10/). 2. b [Subparagraph superseded by Accounting Standards Update No. 2016-10](https://asc.understandingaccounting.org/updates/asu-2016-10/). 3. c [Subparagraph superseded by Accounting Standards Update No. 2016-10](https://asc.understandingaccounting.org/updates/asu-2016-10/). ##### [606-10-55-387](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-387) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:3e9df228ebc39aaea825f07a9eb1c24ba5bff2fd5cda06fd47b4673952b634c3 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Because the nature of the entity's promise in granting the license is to provide the customer with a right to access the entity's intellectual property, in accordance with paragraph [606-10-55-58A](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-58A), the entity accounts for the promised license as a performance obligation satisfied over time. ##### [606-10-55-388](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-388) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:1186c52e24cb39a8253973de0b5d5e12c29c73bda32aece015ef493df3175fe9 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The entity recognizes the fixed consideration allocable to the license performance obligation in accordance with paragraphs [606-10-55-58A](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-58A) and [606-10-55-58C](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-58C). The entity considers paragraphs [606-10-25-31 through 25-37](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-31) in identifying the method that best depicts its performance in the license. Because the contract provides the customer with unlimited use of the licensed characters for a fixed term, the entity determines that a time-based method would be the most appropriate measure of progress toward complete satisfaction of the performance obligation. ##### [606-10-55-389](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-389) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:5c7f2a466738484cf6f56c336e7d2a1ee071dbf0359b0c5a0395811e43d2cf81 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An entity, a music record label, licenses to a customer a recording of a classical symphony by a noted orchestra. The customer, a consumer products company, has the right to use the recorded symphony in all commercials, including television, radio, and online advertisements for two years in Country A starting on January 1, 20X1. In exchange for providing the license, the entity receives fixed consideration of $10,000 per month. The contract does not include any other goods or services to be provided by the entity. The contract is noncancellable. ##### [606-10-55-390](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-390) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:43ba5c9781b7aa56088c81479063ad66687e840ec74c90e61e282a3c8c6dc860 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The entity assesses the goods and services promised to the customer to determine which goods and services are distinct in accordance with paragraph [606-10-25-19](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-19). The entity concludes that its only performance obligation is to grant the license. The term of the license (two years), the geographical scope of the license (that is, the customer's right to use the symphony only in Country A), and the defined permitted uses for the recording (that is, use in commercials) are all attributes of the promised license in this contract. ##### [606-10-55-391](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-391) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:33a75953af1f61ba74b3bf8014cebea056916ac8ca13c10eba5363c2e68089c6 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. In determining that the promised license provides the customer with a right to use its intellectual property as it exists at the point in time at which the license is granted, the entity considers the following: 1. a The classical symphony recording has significant standalone functionality because the recording can be played in its present, completed form without the entity's further involvement. The customer can derive substantial benefit from that functionality regardless of the entity's further activities or actions. Therefore, the nature of the licensed intellectual property is functional. 2. b The contract does not require, and the customer does not reasonably expect, that the entity will undertake activities to change the licensed recording. Therefore, the criteria in paragraph [606-10-55-62](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-62) are not met. ##### [606-10-55-392](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-392) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:19eb986855e2fd19ad58dbd23e169551b68db1db15f900ba9cf7de6057a6cc22 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. In accordance with paragraph [606-10-55-58B](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-58B), the promised license, which provides the customer with a right to use the entity's intellectual property, is a performance obligation satisfied at a point in time. The entity recognizes revenue from the satisfaction of that performance obligation in accordance with paragraphs [606-10-55-58B through 55-58C](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-58B) . Additionally, because of the length of time between the entity's performance (at the beginning of the period) and the customer's monthly payments over two years (which are noncancellable), the entity considers the guidance in paragraphs [606-10-32-15 through 32-20](https://asc.understandingaccounting.org/asc/606/10/#606-10-32-15) to determine whether a significant financing component exists. ##### [606-10-55-392A](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-392A) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:76db21f564f3577cb07992f44427e293fd52a99ea9c6d8e99d5c140a51806752 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. At the end of the first year of the license period, on December 31, 20X1, the entity and the customer agree to renew the license to the recorded symphony for two additional years, subject to the same terms and conditions as the original license. The entity will continue to receive fixed consideration of $10,000 per month during the 2-year renewal period. ##### [606-10-55-392B](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-392B) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:701099405732c0aa875c5aaadb924e94462730779f53477e7dbcca24532e479a Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The entity considers the contract combination guidance in paragraph [606-10-25-9](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-9) and assesses that the renewal was not entered into at or near the same time as the original license and, therefore, is not combined with the initial contract. The entity evaluates whether the renewal should be treated as a new license or the modification of an existing license. Assume that in this scenario, the renewal is distinct. If the price for the renewal reflects its standalone selling price, the entity will, in accordance with paragraph [606-10-25-12](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-12), account for the renewal as a separate contract with the customer. Alternatively, if the price for the renewal does not reflect the standalone selling price of the renewal, the entity will account for the renewal as a modification of the original license contract. ##### [606-10-55-392C](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-392C) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:915030fd68e6ef0bf359c69646d436eb3322b1a0522822c388a7e1834f736a07 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. In determining when to recognize revenue attributable to the license renewal, the entity considers the guidance in paragraph [606-10-55-58C](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-58C) and determines that the customer cannot use and benefit from the license before the beginning of the two-year renewal period on January 1, 20X3. Therefore, revenue for the renewal cannot be recognized before that date. ##### [606-10-55-392D](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-392D) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:bf94bfc1b911d43b5f797b7ba46ae5d06c083bf82ea5d143e9c39c5863e7ba0d Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Consistent with Case A, because the customer's additional monthly payments for the modification to the license will be made over two years from the date the customer obtains control of the second license, the entity considers the guidance in paragraphs [606-10-32-15 through 32-20](https://asc.understandingaccounting.org/asc/606/10/#606-10-32-15) to determine whether a significant financing component exists. ##### [606-10-55-393](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-393) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:77139b4cab6e548b36453f5194c4a45ddaa6857919bbb25ceb297c465e991bdb Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An entity, a movie distribution company, licenses Movie XYZ to a customer. The customer, an operator of cinemas, has the right to show the movie in its cinemas for six weeks. Additionally, the entity has agreed to provide memorabilia from the filming to the customer for display at the customer's cinemas before the beginning of the six-week airing period and to sponsor radio advertisements for Movie XYZ on popular radio stations in the customer's geographical area throughout the six-week airing period. In exchange for providing the license and the additional promotional goods and services, the entity will receive a portion of the operator's ticket sales for Movie XYZ (that is, variable consideration in the form of a sales-based royalty). ##### [606-10-55-394](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-394) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:a3dfe8fbabd2fb07668cf8f94003af6977ff931e1c96efc80c2946b5cd601cd9 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The entity concludes that the license to show Movie XYZ is the predominant item to which the sales-based royalty relates because the entity has a reasonable expectation that the customer would ascribe significantly more value to the license than to the related promotional goods or services. The entity will recognize revenue from the sales-based royalty, the only fees to which the entity is entitled under the contract, wholly in accordance with paragraph [606-10-55-65](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-65). If the license, the memorabilia, and the advertising activities were separate performance obligations, the entity would allocate the sales-based royalties to each performance obligation. ##### [606-10-55-395](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-395) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:4208b5b21b8bfc4838d01e6549d77e5eca403686550f4f46b155dab8888c47be Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An entity, a well-known sports team, licenses the use of its name and logo to a customer. The customer, an apparel designer, has the right to use the sports team's name and logo on items including t-shirts, caps, mugs, and towels for one year. In exchange for providing the license, the entity will receive fixed consideration of $2 million and a royalty of 5 percent of the sales price of any items using the team name or logo. The customer expects that the entity will continue to play games and provide a competitive team. ##### [606-10-55-396](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-396) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:e7d4402a80a71f5fb2965f1874dd50a731582aa5adfd2ef3cf39c44a4747fe2b Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The entity assesses the goods and services promised to the customer to determine which goods and services are distinct in accordance with paragraph [606-10-25-19](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-19). The entity concludes that the only good or service promised to the customer in the contract is the license. The additional activities associated with the license (that is, continuing to play games and provide a competitive team) do not directly transfer a good or service to the customer. Therefore, there is one performance obligation in the contract. ##### [606-10-55-397](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-397) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:47beebcd3e7e73963e423186f3d97598e40845fc57844573521ba3bc72fbd1c4 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. To determine whether the entity's promise in granting the license provides the customer with a right to access the entity's intellectual property or a right to use the entity's intellectual property, the entity assesses the nature of the intellectual property to which the customer obtains rights. The entity concludes that the intellectual property to which the customer obtains rights is symbolic intellectual property. The utility of the team name and logo to the customer is derived from the entity's past and ongoing activities of playing games and providing a competitive team (that is, those activities effectively give value to the intellectual property). Absent those activities, the team name and logo would have little or no utility to the customer because they have no standalone functionality (that is, no ability to perform or fulfill a task separate from their role as symbols of the entity's past and ongoing activities). 1. a [Subparagraph superseded by Accounting Standards Update No. 2016-10](https://asc.understandingaccounting.org/updates/asu-2016-10/). 2. b [Subparagraph superseded by Accounting Standards Update No. 2016-10](https://asc.understandingaccounting.org/updates/asu-2016-10/). 3. c [Subparagraph superseded by Accounting Standards Update No. 2016-10](https://asc.understandingaccounting.org/updates/asu-2016-10/). ##### [606-10-55-398](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-398) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:b21c376745d33ef8aa95813a24df59633af77981266a702585a051f1fe36fe31 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Consequently, the entity's promise in granting the license provides the customer with the right to access the entity's intellectual property throughout the license period and, in accordance with paragraph [606-10-55-58A](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-58A), the entity accounts for the promised license as a performance obligation satisfied over time. ##### [606-10-55-399](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-399) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:d6c0525828401c8810cbc32271406e786c354c33022f6abf92c0469a92ff2b70 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The entity recognizes the fixed consideration allocable to the license performance obligation in accordance with paragraphs [606-10-55-58A](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-58A) and [606-10-55-58C](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-58C). This includes applying paragraphs [606-10-25-31 through 25-37](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-31) to identify the method that best depicts the entity's performance in satisfying the license. For the consideration that is in the form of a sales-based royalty, paragraph [606-10-55-65](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-65)applies because the sales-based royalty relates solely to the license that is the only performance obligation in the contract. The entity concludes that recognizing revenue from the sales-based royalty when the customer's subsequent sales of items using the team name or logo occur is consistent with the guidance in paragraph [606-10-55-65(b)](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-65). That is, the entity concludes that ratable recognition of the fixed consideration of $2 million plus recognition of the royalty fees as the customer's subsequent sales occur reasonably depict the entity's progress toward complete satisfaction of the license performance obligation. ##### [606-10-55-399A](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-399A) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:6ae55ceca3caa4096d646b1fa3d03973df4ae60b14f7e2b04dd9e44ce1968234 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An entity, a television production company, licenses all of the existing episodes of a television show (which consists of the first four seasons) to a customer. The show is presently in its fifth season, and the television production company is producing episodes for that fifth season at the time the contract is entered into, as well as promoting the show to attract further viewership. The Season 5 episodes in production are still subject to change before airing. ##### [606-10-55-399B](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-399B) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:04056cce583d7a9bd2d18b6330118e96cf8e8f555520c16af27100af0c0e19ea Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The customer obtains the right to broadcast the existing episodes, in sequential order, for a period of two years. The show has been successful through the first four seasons, and the customer is both aware that Season 5 already is in production and aware of the entity's continued promotion of the show. The customer will make fixed monthly payments of an equal amount throughout the two-year license period. ##### [606-10-55-399C](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-399C) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:da2bed68548f4db818b2231879fe13a063311ab7d2b6b0fb02d52699a149131b Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The entity assesses the goods and services promised to the customer. The entity's activities to produce Season 5 and its continued promotion of the show do not transfer a promised good or service to the customer. Therefore, the entity concludes that there are no other promised goods or services in the contract other than the license to broadcast the existing episodes in the television series. The contractual requirement to broadcast the episodes in sequential order is an attribute of the license (that is, a restriction on how the customer may use the license); therefore, the only performance obligation in this contract is the single license to the completed Seasons 1-4. ##### [606-10-55-399D](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-399D) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:50338b13c7f8bdf27451092f116ce687b6e8a2ce92d2ad156d9b078fc26f7626 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. To determine whether the promised license provides the customer with a right to use its intellectual property or a right to access its intellectual property, the entity evaluates the intellectual property that is the subject of the license. The existing episodes have substantial standalone functionality at the point in time they are transferred to the customer because the episodes can be aired, in the form transferred, without any further participation by the entity. Therefore, the customer can derive substantial benefit from the completed episodes, which have significant utility to the customer without any further activities of the entity. The entity further observes that the existing episodes are complete and not subject to change. Thus, there is no expectation that the functionality of the intellectual property to which the customer has rights will change (that is, the criteria in paragraph [606-10-55-62](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-62) are not met). Therefore, the entity concludes that the license provides the customer with a right to use its functional intellectual property. ##### [606-10-55-399E](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-399E) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:b2f10d45778b011c6127fb2220e5521dadd5865b818b33903568d8c900443322 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Consequently, in accordance with paragraph [606-10-55-58B](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-58B), the license is a performance obligation satisfied at a point in time. In accordance with paragraphs [606-10-55-58B through 55-58C](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-58B) , the entity recognizes revenue for the license on the date that the customer is first permitted to air the licensed content, assuming the content is made available to the customer on or before that date. The date the customer is first permitted to air the licensed content is the beginning of the period during which the customer is able to use and benefit from its right to use the intellectual property. Because of the length of time between the entity's performance (at the beginning of the period) and the customer's annual payments over two years (which are noncancellable), the entity considers the guidance in paragraphs [606-10-32-15 through 32-20](https://asc.understandingaccounting.org/asc/606/10/#606-10-32-15) to determine whether a significant financing component exists. ##### [606-10-55-399F](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-399F) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:8cad9e644cce96dd96dd063007972c9db7958f3ca64dcc27f1abfdbd1ca091bc Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Consistent with Case A, the contract provides the customer with the right to broadcast the existing episodes, in sequential order, over a period of two years. The contract also grants the customer the right to broadcast the episodes being produced for Season 5 once all of those episodes are completed. ##### [606-10-55-399G](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-399G) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:f10356cf1b3826ce4370fe00bdbdce511e405b41bc895dbba5f8b0602c59ed57 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The entity assesses the goods and services promised to the customer. The entity concludes that there are two promised goods or services in the contract: 1. a The license to the existing episodes (see paragraph [606-10-55-399C](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-399C)) 2. b The license to the episodes comprising Season 5, when all of those episodes are completed. ##### [606-10-55-399H](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-399H) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:ded3f2fef0f8b220084f87d37d11d6c80b9e85c8c4181cb5265e58a2ceec9ed0 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The entity then evaluates whether the license to the existing content is distinct from the license to the Season 5 episodes when they are completed. The entity concludes that the two licenses are distinct from each other and, therefore, separate performance obligations. This conclusion is based on the following analysis: 1. a Each license is capable of being distinct because the customer can benefit from its right to air the existing completed episodes on their own and can benefit from the right to air the episodes comprising Season 5, when they are all completed, on their own and together with the right to air the existing completed content. 2. b Each of the two promises to transfer a license in the contract also is separately identifiable; they do not, together, constitute a single overall promise to the customer. The existing episodes do not modify or customize the Season 5 episodes in production, and the existing episodes do not, together with the pending Season 5 episodes, result in a combined functionality or changed content. The right to air the existing content and the right to air the Season 5 content, when available, are not highly interdependent or highly interrelated because the entity's ability to fulfill its promise to transfer either license is unaffected by its promise to transfer the other. In addition, whether the customer or another licensee had rights to air the future episodes would not be expected to significantly affect the customer's license to air the existing, completed episodes (for example, viewers' desire to watch existing episodes from Seasons 1-4 on the customer's network generally would not be significantly affected by whether the customer, or another network, had the right to broadcast the episodes that will comprise Season 5). ##### [606-10-55-399I](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-399I) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:6cc4960532f7a018c894affac7008d5dc7fc707d9c29a798b8bea1ca57ac1f3e Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The entity assesses the nature of the two separate performance obligations (that is, the license to the existing, completed episodes of the series and the license to episodes that will comprise Season 5 when completed). To determine whether the licenses provide the customer with rights to use the entity's intellectual property or rights to access the entity's intellectual property, the entity considers the following: 1. a The licensed intellectual property (that is, the completed episodes in Seasons 1-4 and the episodes in Season 5, when completed) has significant standalone functionality separate from the entity's ongoing business activities, such as in producing additional intellectual property (for example, future seasons) or in promoting the show, and completed episodes can be aired without the entity's further involvement. 2. b There is no expectation that the entity will substantively change any of the content once it is made available to the customer for broadcast (that is, the criteria in paragraph [606-10-55-62](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-62) are not met). 3. c The activities expected to be undertaken by the entity to produce Season 5 and transfer the right to air those episodes constitute an additional promised good (license) in the contract and, therefore, do not affect the nature of the entity's promise in granting the license to Seasons 1-4. ##### [606-10-55-399J](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-399J) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:2260d4f99eaafe414c684bd6d3a6f024e4a08e4419d2d65acb03dcd44c07af83 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Therefore, the entity concludes that both the license to the existing episodes in the series and the license to the episodes that will comprise Season 5 provide the customer with the right to use its functional intellectual property as it exists at the point in time the license is granted. As a result, the entity recognizes the portion of the transaction price allocated to each license at a point in time in accordance with paragraphs [606-10-55-58B through 55-58C](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-58B) . That is, the entity recognizes the revenue attributable to each license on the date that the customer is first permitted to first air the content included in each performance obligation. That date is the beginning of the period during which the customer is able to use and benefit from its right to use the licensed intellectual property. ##### [606-10-55-399K](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-399K) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:783add6c8d7ecfeb0cc4abd73f8f3be29be789891e88bb851eb93b6cfe97c84c Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. On December 15, 20X0, an entity enters into a contract with a customer that permits the customer to embed the entity's functional intellectual property in two classes of the customer's consumer products (Class 1 and Class 2) for five years beginning on January 1, 20X1. During the first year of the license period, the customer is permitted to embed the entity's intellectual property only in Class 1. Beginning in Year 2 (that is, beginning on January 1, 20X2), the customer is permitted to embed the entity's intellectual property in Class 2. There is no expectation that the entity will undertake activities to change the functionality of the intellectual property during the license period. There are no other promised goods or services in the contract. The entity provides (or otherwise makes available—for example, makes available for download) a copy of the intellectual property to the customer on December 20, 20X0. ##### [606-10-55-399L](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-399L) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:535de6a32dd380063dd3b6bb405afb8c960ad42ee90b1213f9e7d7667826b6b9 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. In identifying the goods and services promised to the customer in the contract (in accordance with guidance in paragraphs [606-10-25-14 through 25-18](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-14) ), the entity considers whether the contract grants the customer a single promise, for which an attribute of the promised license is that during Year 1 of the contract the customer is restricted from embedding the intellectual property in the Class 2 consumer products), or two promises (that is, a license for a right to embed the entity's intellectual property in Class 1 for a five-year period beginning on January 1, 20X1, and a right to embed the entity's intellectual property in Class 2 for a four-year period beginning on January 1, 20X2). ##### [606-10-55-399M](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-399M) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:e8bf10a17121177bf70c0b4ba0ac291c813956599e8e93789cba248513e53ebb Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. In making this assessment, the entity determines that the provision in the contract stipulating that the right for the customer to embed the entity's intellectual property in Class 2 only commences one year after the right for the customer to embed the entity's intellectual property in Class 1 means that after the customer can begin to use and benefit from its right to embed the entity's intellectual property in Class 1 on January 1, 20X1, the entity must still fulfill a second promise to transfer an additional right to use the licensed intellectual property (that is, the entity must still fulfill its promise to grant the customer the right to embed the entity's intellectual property in Class 2). The entity does not transfer control of the right to embed the entity's intellectual property in Class 2 before the customer can begin to use and benefit from that right on January 1, 20X2. ##### [606-10-55-399N](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-399N) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:2fc799ea4944e8472e5806a5730b4bbd1e70cd844b9ca3ba03df863083d66a1d Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The entity then concludes that the first promise (the right to embed the entity's intellectual property in Class 1) and the second promise (the right to embed the entity's intellectual property in Class 2) are distinct from each other. The customer can benefit from each right on its own and independently of the other. Therefore, each right is capable of being distinct in accordance with paragraph [606-10-25-19(a)](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-19)). In addition, the entity concludes that the promise to transfer each license is separately identifiable (that is, each right meets the criterion in paragraph [606-10-25-19(b)](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-19)) on the basis of an evaluation of the principle and the factors in paragraph [606-10-25-21](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-21). The entity concludes that it is not providing any integration service with respect to the two rights (that is, the two rights are not inputs to a combined output with functionality that is different from the functionality provided by the licenses independently), neither right significantly modifies or customizes the other, and the entity can fulfill its promise to transfer each right to the customer independently of the other (that is, the entity could transfer either right to the customer without transferring the other). In addition, neither the Class 1 license nor the Class 2 license is integral to the customer's ability to use or benefit from the other. ##### [606-10-55-399O](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-399O) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:103f98139502ebf1bf10be99c87a4306796559c7eb87b56576f182f198fb3b64 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Because each right is distinct, they constitute separate performance obligations. On the basis of the nature of the licensed intellectual property and the fact that there is no expectation that the entity will undertake activities to change the functionality of the intellectual property during the license period, each promise to transfer one of the two licenses in this contract provides the customer with a right to use the entity's intellectual property and the entity's promise to transfer each license is, therefore, satisfied at a point in time. The entity determines at what point in time to recognize the revenue allocable to each performance obligation in accordance with paragraphs [606-10-55-58B through 55-58C](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-58B) . Because a customer does not control a license until it can begin to use and benefit from the rights conveyed, the entity recognizes revenue allocated to the Class 1 license no earlier than January 1, 20X1, and the revenue on the Class 2 license no earlier than January 1, 20X2. ##### [606-10-55-400](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-400) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:960525a4f35579f53e1dfa78306c80728237c2e7c35bdc77b38a33a2e9d8d20b Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Example 62 illustrates the guidance in paragraphs [606-10-55-66 through 55-78](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-66) on repurchase agreements. ##### [606-10-55-401](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-401) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:e5963b98d9538ff0d348fb930b74ad3235da54604420cc1d2f270edef9e192f3 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An entity enters into a contract with a customer for the sale of a tangible asset on January 1, 20X7, for $1 million. ##### [606-10-55-402](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-402) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:0a26fa4a8201485e0dfab1dfe7394b536dcb5f10dbbec7164cefe85ceab11837 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The contract includes a call option that gives the entity the right to repurchase the asset for $1.1 million on or before December 31, 20X7. ##### [606-10-55-403](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-403) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:8fddb6deb04bc1febb2deca2aeacd9f536b4221af8ac7af87b4159e195efd82d Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Control of the asset does not transfer to the customer on January 1, 20X7, because the entity has a right to repurchase the asset and therefore the customer is limited in its ability to direct the use of, and obtain substantially all of the remaining benefits from, the asset. Consequently, in accordance with paragraph [606-10-55-68(b)](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-68), the entity accounts for the transaction as a financing arrangement because the exercise price is more than the original selling price. In accordance with paragraph [606-10-55-70](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-70), the entity does not derecognize the asset and instead recognizes the cash received as a financial liability. The entity also recognizes interest expense for the difference between the exercise price ($1.1 million) and the cash received ($1 million), which increases the liability. ##### [606-10-55-404](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-404) Pending content: yes Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:967da66c42554d7eb8e65290bf4b93ab6d86fae18673a885e9561470447ab5dc Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. On January 1, 20X7, the option lapses unexercised; therefore, the entity derecognizes the liability and recognizes revenue of $1.1 million. Transition date:(P) December 16, 2026; (N) December 16, 2026Transition guidance: [105-10-65-10](https://asc.understandingaccounting.org/asc/105/10/#105-10-65-10)On December 31, 20X7, the option lapses unexercised; therefore, the entity derecognizes the liability and recognizes revenue of $1.1 million. ##### [606-10-55-405](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-405) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:44c7a0abc4cfbe07e3e479996b4b01f39f2cbc1da1c5fe21093a5c4e4ed5935d Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Instead of having a call option, the contract includes a put option that obliges the entity to repurchase the asset at the customer's request for $900,000 on or before December 31, 20X7. The market value is expected to be $750,000 on December 31, 20X7. ##### [606-10-55-406](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-406) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:3daa4f43f0343c662083a3d27c794e78765390b7ada6d34c3dd5453641412786 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. At the inception of the contract, the entity assesses whether the customer has a significant economic incentive to exercise the put option, to determine the accounting for the transfer of the asset (see paragraphs [606-10-55-72 through 55-78](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-72) ). The entity concludes that the customer has a significant economic incentive to exercise the put option because the repurchase price significantly exceeds the expected market value of the asset at the date of repurchase. The entity determines there are no other relevant factors to consider when assessing whether the customer has a significant economic incentive to exercise the put option. Consequently, the entity concludes that control of the asset does not transfer to the customer because the customer is limited in its ability to direct the use of, and obtain substantially all of the remaining benefits from, the asset. ##### [606-10-55-407](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-407) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:218f6d1d6ad14b658cf3c81cdbdc27fed270d29da4e99bf8d65c0982dc16a786 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. In accordance with paragraphs [606-10-55-72 through 55-73](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-72) , the entity accounts for the transaction as a lease in accordance with Topic 842 on leases. ##### [606-10-55-408](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-408) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:fc8e84b555a29abfe5901df23b46146a45f363a50ec955b06a6615a1b34fd994 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Example 63 illustrates the guidance in paragraphs [606-10-55-81 through 55-84](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-81) on bill-and-hold arrangements. ##### [606-10-55-409](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-409) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:521059fda648fd4ba53d7646199c80183987db895c94cf413bb553f01faaa0fd Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An entity enters into a contract with a customer on January 1, 20X8, for the sale of a machine and spare parts. The manufacturing lead time for the machine and spare parts is two years. ##### [606-10-55-410](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-410) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:66aae46e13dceea1488dced9b271e77e206d1a0a9a4c4fce09068d591f337938 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Upon completion of manufacturing, the entity demonstrates that the machine and spare parts meet the agreed-upon specifications in the contract. The promises to transfer the machine and spare parts are distinct and result in two performance obligations that each will be satisfied at a point in time. On December 31, 20X9, the customer pays for the machine and spare parts but only takes physical possession of the machine. Although the customer inspects and accepts the spare parts, the customer requests that the spare parts be stored at the entity's warehouse because of its close proximity to the customer's factory. The customer has legal title to the spare parts, and the parts can be identified as belonging to the customer. Furthermore, the entity stores the spare parts in a separate section of its warehouse, and the parts are ready for immediate shipment at the customer's request. The entity expects to hold the spare parts for two to four years, and the entity does not have the ability to use the spare parts or direct them to another customer. ##### [606-10-55-411](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-411) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:7f2f62d105b9be0280c964a81c7ad81faa830cd679fa7fc8be7ea990901687a1 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The entity identifies the promise to provide custodial services as a performance obligation because it is a service provided to the customer and it is distinct from the machine and spare parts. Consequently, the entity accounts for three performance obligations in the contract (the promises to provide the machine, the spare parts, and the custodial services). The transaction price is allocated to the three performance obligations and revenue is recognized when (or as) control transfers to the customer. ##### [606-10-55-412](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-412) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:4cb414630440076b98765ec7710af3c127ac5f017304e9c010d0a599b9b70b27 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Control of the machine transfers to the customer on December 31, 20X9, when the customer takes physical possession. The entity assesses the indicators in paragraph [606-10-25-30](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-30) to determine the point in time at which control of the spare parts transfers to the customer, noting that the entity has received payment, the customer has legal title to the spare parts, and the customer has inspected and accepted the spare parts. In addition, the entity concludes that all of the criteria in paragraph [606-10-55-83](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-83) are met, which is necessary for the entity to recognize revenue in a bill-and-hold arrangement. The entity recognizes revenue for the spare parts on December 31, 20X9, when control transfers to the customer. ##### [606-10-55-413](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-413) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:15.344Z to 2026-09-09T23:18:15.344Z Record version: sha256:96a8cc67c08989f3d1cd679a0a075b7c7ec761650ceb5ddfdbb448b49b18a891 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The performance obligation to provide custodial services is satisfied over time as the services are provided. The entity considers whether the payment terms include a significant financing component in accordance with paragraphs [606-10-32-15 through 32-20](https://asc.understandingaccounting.org/asc/606/10/#606-10-32-15) . Source downloaded (UTC): 2026-09-09T23:18:17.916Z to 2026-09-09T23:18:17.916Z Record version: sha256:73599d342bea59fd282ff817c73c689c29ab7bd99548b4cdc6fa36250533e096 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 606-10-60: 60 Relationships [Read section](https://asc.understandingaccounting.org/asc/606/10/#60-relationships) SEC content: no #### Costs Related to a Contract with a Customer ##### [606-10-60-1](https://asc.understandingaccounting.org/asc/606/10/#606-10-60-1) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:17.916Z to 2026-09-09T23:18:17.916Z Record version: sha256:8308a1857cf2a9a4c77a166d0b599f49281c5bb222279a378df2f964cf05cbfe Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. For guidance on the costs related to a [contract](https://asc.understandingaccounting.org/glossary/c/#contract "An agreement between two or more parties that creates enforceable rights and obligations.") with a [customer](https://asc.understandingaccounting.org/glossary/c/#customer "A party that has contracted with an entity to obtain goods or services that are an output of the entity's ordinary activities in exchange for consideration.") that is within the scope of this Topic, see Subtopic 340-40. #### Revenue Recognition ##### [606-10-60-2](https://asc.understandingaccounting.org/asc/606/10/#606-10-60-2) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:17.916Z to 2026-09-09T23:18:17.916Z Record version: sha256:052cf682a8f11bcb658fc86ff79ff1ca5dc2dd5f6e626c0dc808ce175e69c81e Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. For guidance on recognizing [revenue](https://asc.understandingaccounting.org/glossary/r/#revenue "Inflows or other enhancements of assets of an entity or settlements of its liabilities (or a combination of both) from delivering or producing goods, rendering services, or other activities that constitute the entity's ongoing major or central operations.") from [contracts](https://asc.understandingaccounting.org/glossary/c/#contract "An agreement between two or more parties that creates enforceable rights and obligations.") that are not within scope of this Topic by entities in the agriculture industry, see Subtopic 905-605. ##### [606-10-60-3](https://asc.understandingaccounting.org/asc/606/10/#606-10-60-3) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:17.916Z to 2026-09-09T23:18:17.916Z Record version: sha256:738938bf95e5eadec504a1970edfc2b2bceaabc679bf01a5067302471c19d928 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. For guidance on recognizing revenue from contracts that are not within scope of this Topic by insurance entities, see Subtopic 944-605. ##### [606-10-60-4](https://asc.understandingaccounting.org/asc/606/10/#606-10-60-4) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:17.916Z to 2026-09-09T23:18:17.916Z Record version: sha256:c8e76d43a82d2ab00a6e296f5c7012c8b4ff1e14419cadc1ca23bd470572f63b Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. For guidance on recognizing revenue from contracts that are not within scope of this Topic by health care entities, see Subtopic 954-605. ##### [606-10-60-5](https://asc.understandingaccounting.org/asc/606/10/#606-10-60-5) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:17.916Z to 2026-09-09T23:18:17.916Z Record version: sha256:7f86d195f32434b41d561c405de2741ef49aadb75fd4bcc4cb74bad5c7fd16ff Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. For guidance on recognizing revenue from contracts that are not within scope of this Topic by not-for-profit entities, see Subtopic 958-605. ##### [606-10-60-6](https://asc.understandingaccounting.org/asc/606/10/#606-10-60-6) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:17.916Z to 2026-09-09T23:18:17.916Z Record version: sha256:85518e31816e19c16af3c789116fdd0eabd48d9c157780842d6fa7ec725c1d26 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. For guidance on recognizing revenue and disclosure requirements for contracts that are not within scope of this Topic by entities with regulated operations, see Subtopic 980-605. #### Provision for Losses ##### [606-10-60-7](https://asc.understandingaccounting.org/asc/606/10/#606-10-60-7) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:17.916Z to 2026-09-09T23:18:17.916Z Record version: sha256:7691b3866735ebc09e11db1a2319f188651d961c7c81d1a08a079660d485e3e8 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. For guidance on determining the need for a provision for losses on certain software arrangements, see Subtopic 985-605. ##### [606-10-60-8](https://asc.understandingaccounting.org/asc/606/10/#606-10-60-8) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:17.916Z to 2026-09-09T23:18:17.916Z Record version: sha256:1d5b4dcaa3f8e484f91b7014590caf306e37c5aa13f94cd8aa7a4ea1aabe8310 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. For guidance on determining the need for a provision for losses on certain reinsurance **[contracts](https://asc.understandingaccounting.org/glossary/c/#contract "An agreement between two or more parties that creates enforceable rights and obligations.")**, See Subtopic 944-605. ##### [606-10-60-9](https://asc.understandingaccounting.org/asc/606/10/#606-10-60-9) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:17.916Z to 2026-09-09T23:18:17.916Z Record version: sha256:36075461e4b0b0bb7d58c08e2e0e8f713dc7f264c890089c2253748281c349f3 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. For guidance on determining the need for a provision for losses for construction-type and production-type contracts, see Subtopic 605-35. ##### [606-10-60-10](https://asc.understandingaccounting.org/asc/606/10/#606-10-60-10) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:17.916Z to 2026-09-09T23:18:17.916Z Record version: sha256:b2320eb6c70e451637fec38b46fd10bd292f22c057e94f4cd1683792bb706cc3 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. For guidance on recognizing a loss on separately priced extended warranty and product maintenance contracts, see Subtopic 605-20. ##### [606-10-60-11](https://asc.understandingaccounting.org/asc/606/10/#606-10-60-11) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:17.916Z to 2026-09-09T23:18:17.916Z Record version: sha256:0183c46f5c5fded9d60ab400b8378f7c095ced11f92b2736e828b19eb9d56f9a Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. For guidance on determining whether a liability should be recognized for a continuing care retirement community for its obligation to provide future services and the use of facilities to current residents, see Sections 954-440-25 and 954-440-35. ##### [606-10-60-12](https://asc.understandingaccounting.org/asc/606/10/#606-10-60-12) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:17.916Z to 2026-09-09T23:18:17.916Z Record version: sha256:837421579d47fab12f33dee41505e8e80a3b7823c466038787b332369c68f5e2 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. For guidance on determining when to recognize a loss under prepaid health care services contracts, see paragraph [954-450-30-4](https://asc.understandingaccounting.org/asc/450/954/#450-954-30-4). ##### [606-10-60-13](https://asc.understandingaccounting.org/asc/606/10/#606-10-60-13) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:17.916Z to 2026-09-09T23:18:17.916Z Record version: sha256:4a7c3139b214ebb4aecd2d18d9e44b5e21956ce7aab4462ad3a1df9874a038d0 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. For guidance on recognizing a loss on long-term power sales contracts, see paragraph [980-350-35-3](https://asc.understandingaccounting.org/asc/350/980/#350-980-35-3). ##### [606-10-60-14](https://asc.understandingaccounting.org/asc/606/10/#606-10-60-14) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:17.916Z to 2026-09-09T23:18:17.916Z Record version: sha256:142186e743aae6fca5893ed66e76b2194cb44bd458781271c3d782aea945ad92 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. For guidance on the presentation of a loss on a termination of a contract for default, see paragraph [912-20-25-4](https://asc.understandingaccounting.org/asc/912/20/#912-20-25-4). #### Interest—Imputation of Interest ##### [606-10-60-15](https://asc.understandingaccounting.org/asc/606/10/#606-10-60-15) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:17.916Z to 2026-09-09T23:18:17.916Z Record version: sha256:33af8d8bf4b08527d14b8683890a3c50d57ce369dd96c890ea32b1ea9ad48cc2 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. For guidance on imputation of interest on contracts that are not within scope of Topic 606, see Subtopic 835-30. #### Nonmonetary Transactions ##### [606-10-60-16](https://asc.understandingaccounting.org/asc/606/10/#606-10-60-16) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:17.916Z to 2026-09-09T23:18:17.916Z Record version: sha256:53dd45aa22f30aaa119cbcd0c16997f1092968acfb1da3e6a634d6567e459c40 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. For guidance on nonmonetary transactions (that is, transactions including noncash consideration) in contracts that are not within scope of this Topic, see Subtopic 845-10. Source downloaded (UTC): 2026-09-09T23:18:20.163Z to 2026-09-09T23:18:20.163Z Record version: sha256:636b86d9df01bf0a8f3cc9de80d5cef68af5348d476228f126921dac821616ad Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 606-10-65: 65 Transition and Open Effective Date Information [Read section](https://asc.understandingaccounting.org/asc/606/10/#65-transition-and-open-effective-date-information) SEC content: no ##### [606-10-65-1](https://asc.understandingaccounting.org/asc/606/10/#606-10-65-1) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:20.163Z to 2026-09-09T23:18:20.163Z Record version: sha256:2a507b3d3729584c74cd8efc642fe3164b3e8e6cfdf82b54a1af569928fbcaff Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Paragraph superseded on 12/14/2022 after the end of the transition period stated in Accounting Standards Updates No. 2014-09, _Revenue from Contracts with Customers (Topic 606)_, No. 2016-08, _Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net),_ No. 2016-10, _Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing,_ No. 2016-12, _Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients,_ No. 2016-20, _Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers,_ No. 2017-05, _Other Income—Gains and Losses from the Derecognition of Nonfinancial Assets (Subtopic 610-20): Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets_, and No. 2020-05, _Revenue from Contracts with Customers (Topic 606) and Leases (Topic 842): Effective Dates for Certain Entities_. #### Transition Related to Accounting Standards Update No. 2025-04, Compensation—Stock Compensation (Topic 718) and Revenue from Contracts with Customers (Topic 606): Clarifications to Share-Based Consideration Payable to a Customer ##### [606-10-65-2](https://asc.understandingaccounting.org/asc/606/10/#606-10-65-2) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:20.163Z to 2026-09-09T23:18:20.163Z Record version: sha256:2986271e5619d498b66f0de3bf6c28c03760aeeb4f7d8cd6fcfaa9000ff9cda9 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. [Accounting Standards Update 2025-04](https://asc.understandingaccounting.org/updates/asu-2024-02/) 2026-12-16 2026-12-16 2026-12-16 2026-12-16 2026-12-16 2026-12-16 2026-12-16 2026-12-16 2026-12-16 2026-12-16 2026-12-16 2026-12-16 2026-12-16 2026-12-16 2026-12-16 The following represents the transition and effective date information related to Accounting Standards Update No. 2025-04, _Compensation—Stock Compensation (Topic 718) and Revenue from Contracts with Customers (Topic 606): Clarifications to Share-Based Consideration Payable to a Customer:_ **Effective date and early adoption** 1. a All entities shall apply the pending content that links to this paragraph for annual reporting periods beginning after December 15, 2026, and interim reporting periods within those annual reporting periods. 2. b Early adoption of the pending content that links to this paragraph is permitted in an interim or annual reporting period in which financial statements have not yet been issued (or made available for issuance). If an entity adopts the pending content that links to this paragraph in an interim reporting period, it shall adopt the pending content as of the beginning of the annual reporting period that includes that interim reporting period. **Transition method** 1. c An entity shall apply the pending content that links to this paragraph using one of the following transition methods: 1. 1 On a modified retrospective basis through a cumulative-effect adjustment to the opening balance of retained earnings (or other appropriate components of equity or net assets in the statement of financial position) as of the beginning of the annual reporting period in which the pending content that links to this paragraph is adopted. 2. 2 On a retrospective basis through a cumulative-effect adjustment to the opening balance of retained earnings (or other appropriate components of equity or net assets in the statement of financial position) as of the beginning of the first period presented in accordance with the guidance on accounting changes in paragraphs [250-10-45-5](https://asc.understandingaccounting.org/asc/250/10/#250-10-45-5) and [250-10-45-8](https://asc.understandingaccounting.org/asc/250/10/#250-10-45-8). If retrospective transition is applied, an entity shall use the actual outcome, if known, of a performance condition or service condition as of the beginning of the annual reporting period in which the pending content that links to this paragraph is adopted for all prior-period estimates. If the actual outcome is unknown, an entity shall use its estimate of the probability of achieving a service condition or performance condition as of the beginning of the annual reporting period of adoption for all prior-period estimates. **Transition disclosures** 1. d An entity applying the pending content that links to this paragraph in accordance with (c)(1) shall provide the following transition disclosures in the financial statements of both the interim reporting period (if applicable) and the annual reporting period of the change: 1. 1 The nature of the change in accounting principle, including an explanation of the newly adopted accounting principle 2. 2 The method of applying the change 3. 3 The cumulative effect of the change on retained earnings or other components of equity in the statement of financial position as of the annual reporting period in which the pending content that links to this paragraph is adopted. 1. e An entity applying the pending content that links to this paragraph in accordance with (c)(2) shall provide the following transition disclosures in the financial statements of both the interim reporting period (if applicable) and the annual reporting period of the change: 1. 1 The nature of the change in accounting principle, including an explanation of the newly adopted accounting principle 2. 2 The method of applying the change 3. 3 The cumulative effect of the change on retained earnings or other components of equity in the statement of financial position as of the beginning of the earliest period presented 4. 4 The effect of the change on income from continuing operations, net income (or other appropriate captions of changes in the applicable net assets or performance indicator), any other affected financial statement line item, and any affected per-share amounts for any prior periods retrospectively adjusted. #### Transition Related to Accounting Standards Update No. 2025-07, Derivatives and Hedging (Topic 815) and Revenue from Contracts with Customers (Topic 606): Derivatives Scope Refinements and Scope Clarification for Share-Based Noncash Consideration from a Customer in a Revenue Contract ##### [606-10-65-3](https://asc.understandingaccounting.org/asc/606/10/#606-10-65-3) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:20.163Z to 2026-09-09T23:18:20.163Z Record version: sha256:248bd1921fecf0e20396a9f1fa2e1230473a2d2d00ada30690795b2dd37f0214 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. [Accounting Standards Update 2025-07](https://asc.understandingaccounting.org/updates/asu-2025-07/) 2028-6-13 2026-12-16 2026-12-16 2026-12-16 2026-12-16 2026-12-16 2026-12-16 2026-12-16 2026-12-16 2026-12-16 2026-12-16 2026-12-16 2026-12-16 2026-12-16 2026-12-16 The following represents the transition and effective date information related to Accounting Standards Update No. 2025-07, _Derivatives and Hedging (Topic 815) and Revenue from Contracts with Customers (Topic 606): Derivatives Scope Refinements and Scope Clarification for Share-Based Noncash Consideration from a Customer in a Revenue Contract_: **Effective date and early adoption** 1. a All entities shall apply the pending content that links to this paragraph for annual reporting periods beginning after December 15, 2026, and interim reporting periods within those annual reporting periods. 2. b Early adoption of the pending content that links to this paragraph is permitted in both interim and annual reporting periods for which financial statements have not yet been issued or made available for issuance. If an entity early adopts the pending content that links to this paragraph in an interim reporting period, it shall apply the pending content as of the beginning of the annual reporting period that includes that interim reporting period. If an entity early adopts the pending content that links to this paragraph, it also shall early adopt the pending content that links to paragraph [815-10-65-8](https://asc.understandingaccounting.org/asc/815/10/#815-10-65-8) simultaneously. **Transition method** 1. c An entity shall apply the pending content that links to this paragraph using one of the following transition methods: 1. 1 Prospectively to new contracts entered into on or after the date of adoption, including modified contracts accounted for as separate contracts in accordance with paragraph [606-10-25-12](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-12) 2. 2 On a modified retrospective basis through a cumulative-effect adjustment to the opening balance of retained earnings (or other appropriate components of equity or net assets in the statement of financial position) as of the beginning of the annual reporting period of adoption for contracts existing as of the beginning of the annual reporting period of adoption. **Transition disclosures** 1. d An entity that applies the transition method in (c)(1) shall disclose the nature of and reason for the change in accounting principle in both the interim reporting period and the annual reporting period in which the entity adopts the pending content that links to this paragraph. 2. e An entity that applies the transition method in (c)(2) shall disclose the following in both the interim reporting period and the annual reporting period in which the entity adopts the pending content that links to this paragraph: 1. 1 The nature of and reason for the change in accounting principle 2. 2 The cumulative effect of the change on retained earnings or other components of equity or net assets in the statement of financial position as of the beginning of the annual reporting period of adoption. Source downloaded (UTC): 2026-09-09T23:18:25.416Z to 2026-09-09T23:18:25.416Z Record version: sha256:9769c8233211855e7a9b3104e9dbcaaea36bc6f2c239974a82b24237ac382f8d Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 606-10-S00: SEC 00 Status [Read section](https://asc.understandingaccounting.org/asc/606/10/#sec-00-status) SEC content: yes ##### [606-10-S00-1](https://asc.understandingaccounting.org/asc/606/10/#606-10-S00-1) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:25.416Z to 2026-09-09T23:18:25.416Z Record version: sha256:e6981d84b9250e1b9c80074637a28521f82822bf59bfc0656e5d0353d7ea39ad Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The following table identifies the changes made to this Subtopic.
ParagraphActionAccounting Standards UpdateDate
606-10-S25-1AddedAccounting Standards Update No. 2017-1411/22/2017
606-10-S65-1AddedAccounting Standards Update No. 2017-1309/29/2017
Source downloaded (UTC): 2026-09-09T23:18:29.802Z to 2026-09-09T23:18:29.802Z Record version: sha256:235018f1073c80d50088d6eefd7275da38a96ba386acf39a40f58bb46ca53457 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 606-10-S25: SEC 25 Recognition [Read section](https://asc.understandingaccounting.org/asc/606/10/#sec-25-recognition) SEC content: yes ##### [606-10-S25-1](https://asc.understandingaccounting.org/asc/606/10/#606-10-S25-1) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:29.802Z to 2026-09-09T23:18:29.802Z Record version: sha256:2012885797934d04eb013fa33f5019a524ee5b2ce42aa7f828c1015fd9d78163 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The following is the text of Interpretive Release No. 33-10403: Updates to Commission Guidance Regarding Accounting for Sales of Vaccines and Bioterror Countermeasures to the Federal Government for Placement into the Pediatric Vaccine Stockpile or the Strategic National Stockpile. - **AGENCY:** Securities and Exchange Commission. - **ACTION:** Interpretation. - **SUMMARY:** The Securities and Exchange Commission is publishing this interpretive release to update previously issued guidance with respect to accounting for sales of vaccines and bioterror countermeasures to the Federal Government for placement into stockpiles related to the Vaccines for Children Program or the Strategic National Stockpile. This update is being provided to bring existing guidance into conformity with Financial Accounting Standards Board's Accounting Standards Codification Topic 606, _Revenue from Contracts with Customers_. This guidance is applicable upon a registrant's adoption of Accounting Standards Codification Topic 606 and is applicable to all arrangements for which revenue is recognized in accordance with Accounting Standards Codification Topic 606. - **EFFECTIVE DATE:** August 29, 2017. - **FOR FURTHER INFORMATION CONTACT:** Kevin L. Vaughn, Senior Associate Chief Accountant, or Joseph R. Epstein, Professional Accounting Fellow, Office of the Chief Accountant, at (202) 551-5300, U.S. Securities and Exchange Commission, 100 F Street, NE, Washington, DC 20549-6561. Inquiries about this interpretive release also can be directed to oca@sec.gov. - **SUPPLEMENTARY INFORMATION:** - **I. Introduction** - The Securities and Exchange Commission (“Commission”) continues to be committed, as stated in previously-issued guidance (the “2005 Release”), FN1 to addressing any unintended consequences of accounting requirements that could impair the nation's ability to create and maintain sufficient supplies of various vaccines and bioterror countermeasures (“enumerated vaccines”). The Commission issued the 2005 Release to address questions about the timing of revenue recognition for vaccines placed into the Vaccines for Children Program and the Strategic National Stockpile. At the time of the 2005 Release, some expressed concerns that the application of generally accepted accounting principles may require revenue recognition to be delayed beyond the period in which the vaccine is placed in the stockpile, and may have an unintended consequence of causing some vaccine manufacturers to decline to participate in these critical stockpile programs. The Commission published the guidance in the 2005 Release to resolve the accounting questions. With the Financial Accounting Standards Board's (“FASB”) issuance of Accounting Standards Codification (“ASC”) Topic 606, _Revenues from Contracts with Customers_ (“ASC Topic 606”), FN2 we are providing this updated guidance. - FN1 _See Commission Guidance Regarding Accounting for Sales of Vaccines and Bioterror Countermeasures to the Federal Government for Placement into the Pediatric Vaccine Stockpile or the Strategic National Stockpile_, Release No. 33-8642 (Dec. 5, 2005). - FN2 The International Accounting Standards Board (IASB) has also issued IFRS 15, _Revenue from Contracts with Customers_ (IFRS 15). The issuance of ASC Topic 606 and IFRS 15 completes the joint effort by the FASB and IASB that was undertaken with the intent of improving financial reporting by creating converged comprehensive revenue recognition guidance for U.S. GAAP and IFRS. - Government vaccine stockpile programs are unique in many respects. For example, the primary objective of purchasing the vaccines is not to take delivery for ultimate use but rather to be able to require immediate delivery on notice. An additional characteristic of vaccine stockpiles is the limited shelf life of the vaccines. For these and other reasons, the Commission continues to limit this guidance to the vaccines enumerated below. - **II. The Application of Generally Accepted Accounting Principles for Revenue Recognition to Vaccine Stockpiles** - The Commission historically has recognized pronouncements of the FASB as authoritative in the absence of any contrary determination by the Commission. FN3 In Financial Reporting Release No. 70, FN4 the Commission stated its determination that the FASB and its parent organization, the Financial Accounting Foundation, satisfied the criteria in Section 19(b) of the Securities Act of 1933 FN5 and, accordingly, FASB's financial accounting and reporting standards are recognized as “generally accepted” for purposes of the federal securities laws. As a result, registrants are required to comply with those standards in preparing financial statements filed with the Commission, unless the Commission provides otherwise. FN6 - FN3 Rule 4-01(a)(1) of Regulation S-X, 17 CFR 210.4-01(a)(1). See Accounting Series Release (“ASR”) No. 150 (Dec. 20, 1973) and ASR No. 4 (Apr. 25, 1938). - FN4 _Policy Statement: Reaffirming the Status of the FASB as a Designated Private-Sector Standard Setter_, Release Nos. 33-8221; 34-47743; IC-26028; FR-70 (Apr. 25, 2003) (“FR-70”); 68 FR 23333 (May 1, 2003). - FN5 15 U.S.C 77s(b). - FN6 _See_ FR-70; Rule 4-01(a)(1) of Regulation S-X, 17 CFR 210.4-01(a)(1). - Although no specific guidance has been published by the FASB related to revenue recognition for vaccine stockpiles, the FASB has issued comprehensive revenue recognition guidance in ASC Topic 606, which supersedes most previous revenue recognition guidance issued by the FASB. - In response to the new, comprehensive revenue recognition model in ASC Topic 606, simultaneous with publication of this release, the Commission has issued an interpretation stating FN7 that upon the registrant's adoption of ASC Topic 606, such registrant should no longer rely on the guidance in Securities Exchange Act Release No. 23507 and Accounting and Auditing Enforcement Release No. 108, _In the Matter of Stewart Parness_ (“AAER 108”), FN8 which set forth criteria to be met in order to recognize revenue when delivery has not occurred. The Commission staff had previously reiterated the guidance in AAER 108 in Staff Accounting Bulletin (“SAB”) Topic 13, _Revenue Recognition_, which the staff is modifying as a result of the FASB's issuance of ASC Topic 606. - FN7 _Commission Guidance Regarding Revenue Recognition for Bill-and-Hold Arrangements_, Release No. 33-10402 (Aug. 18, 2017). - FN8 _See In the Matter of Stewart Parness_, AAER 108 (Aug. 5, 1986). - Under ASC Topic 606, the general criteria for revenue recognition includes identifying the contract(s) with a customer, identifying the performance obligations in the contract, determining the transaction price, allocating the transaction price to the performance obligations in the contract, and recognizing revenue when (or as) the entity satisfies a performance obligation by transferring a promised good or service to a customer. FN9 A good or service is transferred when (or as) the customer obtains control of that good or service and ASC Topic 606 sets forth indicators of when control has been transferred. FN10 - FN9 _See_ ASC paragraph [606-10-05-4](https://asc.understandingaccounting.org/asc/606/10/#606-10-05-4). - FN10 _See_ ASC paragraphs [606-10-25-23 through 25-30](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-23) . - ASC Topic 606 also provides specific guidance on contracts under which an entity bills a customer for a product but the entity retains physical possession of the product until it is transferred to the customer at a point in time in the future (i.e., a bill-and-hold arrangement). FN11 Topic 606 acknowledges that, for some contracts, a customer may obtain control of a product even though that product remains in an entity's physical possession. FN12 In order to recognize revenue in a bill-and-hold arrangement, Topic 606 requires consideration of the indicators of when control has been transferred and sets forth additional criteria to be met. FN13 - FN11 _See_ ASC paragraphs [606-10-55-81 through 55-84](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-81) . - FN12 _See_ ASC paragraph [606-10-55-82](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-82). - FN13 _See_ ASC paragraph [606-10-55-83](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-83). - **III. Updated Commission Guidance** - The Commission believes vaccine manufacturers should recognize revenue and provide the disclosures required under ASC Topic 606 when vaccines are placed into Federal Governmental stockpile programs because control of the enumerated vaccines will have been transferred to the customer and the criteria to recognize revenue in a bill-and-hold arrangement under ASC Topic 606 will have been met. - The following are the enumerated vaccines subject to this release: - • Childhood disease vaccines; - • Influenza vaccines; and - • Other vaccines and countermeasures sold to the Federal Government for placement in the Strategic National Stockpile. - Due to the uniqueness of the vaccine stockpile programs as discussed above, this interpretative guidance is not applicable to transactions other than the sales of enumerated vaccines by vaccine manufacturers. - Prior to a registrant's adoption of ASC Topic 606, the guidance contained in the 2005 Release is still applicable to all arrangements for which revenue is recognized. - **List of Subjects** - 17 CFR Parts 231, 241, and 271 - Securities. - Amendments to the Code of Federal Regulations - For the reasons set out in the preamble, the Commission is amending Title 17, chapter II of the Code of Federal Regulations as set forth below: - **PART 231 - INTERPRETATIVE RELEASES RELATING TO THE SECURITIES ACT OF 1933 AND GENERAL RULES AND REGULATIONS THEREUNDER** - Part 231 is amended by adding Release No. 33-10403 and the release date of August 18, 2017 to the list of interpretive releases. - **PART 241 - INTERPRETATIVE RELEASES RELATING TO THE SECURITIES EXCHANGE ACT OF 1934 AND GENERAL RULES AND REGULATIONS THEREUNDER** - Part 241 is amended by adding Release No. 34-81429 and the release date of August 18, 2017 to the list of interpretive releases. - **PART 271 - INTERPRETATIVE RELEASES RELATING TO THE INVESTMENT COMPANY ACT OF 1940 AND GENERAL RULES AND REGULATIONS THEREUNDER** - Part 271 is amended by adding Release No. IC-32785 and the release date of August 18, 2017 to the list of interpretive releases. - By the Commission. - Dated: August 18, 2017 - Jill M. Peterson - Assistant Secretary Source downloaded (UTC): 2026-09-09T23:18:32.707Z to 2026-09-09T23:18:32.707Z Record version: sha256:375a195108c6d39bd7291427e9e97b43a9ac565fcf0254973f024924e81dcfe3 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 606-10-S65: SEC 65 Transition and Open Effective Date Information [Read section](https://asc.understandingaccounting.org/asc/606/10/#sec-65-transition-and-open-effective-date-information) SEC content: yes #### SEC Staff Guidance ##### [606-10-S65-1](https://asc.understandingaccounting.org/asc/606/10/#606-10-S65-1) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:32.707Z to 2026-09-09T23:18:32.707Z Record version: sha256:dff7021159244b7bc51d86ab12e029c25acc2014e72de8eac301975d358b49a1 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The following is the text of SEC Staff Announcement: Transition Related to Accounting Standards Updates No. 2014-09 and 2016-02. - FASB Accounting Standards Updates No. 2014-09, _Revenue from Contracts with Customers (Topic 606)_, issued in May 2014 and codified in ASC Topic 606, Revenue from Contracts with Customers, and No. 2016-02, _Leases (Topic 842)_, issued in February 2016 and codified in ASC Topic 842, Leases, provide effective dates that differ for (1) [public business entities](https://asc.understandingaccounting.org/glossary/p/#public-business-entity "A public business entity is a business entity meeting any one of the criteria below. Neither a not-for-profit entity nor an employee benefit plan is a business entity. It is required by the U.S. Securities and Exchange Commission (SEC) to file or furnish financial statements, or does file or furnish financial statements (including voluntary filers), with the SEC (including other entities whose financial statements or financial information are required to be or are included in a filing). It is required by the Securities Exchange Act of 1934 (the Act), as amended, or rules or regulations promulgated under the Act, to file or furnish financial statements with a regulatory agency other than the SEC. It is required to file or furnish financial statements with a foreign or domestic regulatory agency in preparation for the sale of or for purposes of issuing securities that are not subject to contractual restrictions on transfer. It has issued, or is a conduit bond obligor for, securities that are traded, listed, or quoted on an exchange or an over-the-counter market. It has one or more securities that are not subject to contractual restrictions on transfer, and it is required by law, contract, or regulation to prepare U.S. GAAP financial statements (including notes) and make them publicly available on a periodic basis (for example, interim or annual periods). An entity must meet both of these conditions to meet this criterion. An entity may meet the definition of a public business entity solely because its financial statements or financial information is included in another entity's filing with the SEC. In that case, the entity is only a public business entity for purposes of financial statements that are filed or furnished with the SEC.") and certain other specified entities and (2) all other entities. The SEC staff has received inquiries from stakeholders regarding the application of the effective dates of ASC Topic 606 and ASC Topic 842 for a public business entityFN1 that otherwise would not meet the definition of a public business entity except for a requirement to include or the inclusion of its financial statements or financial information in another entity's filing with the SEC. - The transition provisions in ASC Topic 606 require that a public business entity and certain other specified entities adopt ASC Topic 606 for annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period. FN2 All other entities are required to adopt ASC Topic 606 for annual reporting periods beginning after December 15, 2018, and interim reporting periods within annual reporting periods beginning after December 15, 2019. - The transition provisions in ASC Topic 842 require that a public business entity and certain other specified entities adopt ASC Topic 842 for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. FN3 All other entities are required to adopt ASC Topic 842 for fiscal years beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2020. - In response to the stakeholder inquiries outlined above, the SEC staff would not object to a public business entity that otherwise would not meet the definition of a public business entity except for a requirement to include or the inclusion of its financial statements or financial information in another entity's filing with the SEC adopting (1) ASC Topic 606 for annual reporting periods beginning after December 15, 2018, and interim reporting periods within annual reporting periods beginning after December 15, 2019, and (2) ASC Topic 842 for fiscal years beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2020. - A public business entity that otherwise would not meet the definition of a public business entity except for a requirement to include or the inclusion of its financial statements or financial information in another entity's filing with the SEC may still elect to adopt ASC Topic 606 and ASC Topic 842 according to the public business entity effective dates outlined above. - This announcement is applicable only to public business entities that otherwise would not meet the definition of a public business entity except for a requirement to include or the inclusion of its financial statements or financial information in another entity's filing with the SEC. This announcement is not applicable to other public business entities. - FN 1 The definition of _Public Business Entity_ in the FASB's ASC Master Glossary states, in part, the following: - A public business entity is a business entity meeting any one of the criteria below . . . 1. a It is required by the U.S. Securities and Exchange Commission (SEC) to file or furnish financial statements, or does file or furnish financial statements (including voluntary filers), with the SEC (including other entities whose financial statements or financial information are required to be or are included in a filing) . . . - An entity may meet the definition of a public business entity solely because its financial statements or financial information is included in another entity's filing with the SEC. In that case, the entity is only a public business entity for purposes of financial statements that are filed or furnished with the SEC. - FN 2 Early adoption of ASC Topic 606 is permitted for public business entities and certain other specified entities only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period. - FN 3 Early adoption of ASC Topic 842 is permitted for public business entities and certain other specified entities, as well as for all other entities.