Properly identifying performance obligations is a critical step in the five-step revenue recognition model. It is a step that must be completed at the inception of the contract and prior to moving on to step three of the model. As discussed in segment one on performance obligations, there are many types and variations of obligations and as such, management will be required to utilize significant judgment when applying this step. However, it is important that the judgment be supported by considerations of the proper factors. The course further evaluates areas that impact performance obligations. We utilize multiple examples from various industries to illustrate the considerations that must be evaluated in line with both identifying performance obligations and allocating the transaction price appropriately.
Learning Objectives
Explore the concept of revenue recognition related to performance obligations that may involve components such as: Options to purchase additional goods/services Identifying material rights Shipping and handling charges Identify and examine factors impacting performance obligations including: Principal vs. agent status Warranties Options for additional goods and services Non-refundable up-front fees Stand-ready obligations Rights of returns
Major Topics
Revenue Recognition Accounting
