ASC 606 Revenue Recognition: Considerations for Identifying the Contract Part 1
Date: Monday, December 7, 2026
Instructor: Lynn Fountain
| Begin Time: |
11:00am Pacific Time
12:00pm Mountain Time
1:00pm Central Time
2:00pm Eastern Time |
| CPE Credit: |
2 hours for CPAs |
|
Revenue recognition is one of the most scrutinized areas of accounting, and ASC 606, Revenue from Contracts with Customers, fundamentally reshaped how organizations determine, measure, and present revenue.
The first step in the ASC 606 five-step model—identifying the contract with a customer—is a critical foundation. If an entity fails to appropriately assess whether a valid contract exists, the resulting revenue recognition can be materially misstated. This course provides an in-depth exploration of the guidance, judgments, and practical challenges surrounding the identification of contracts under ASC 606.
The program begins with an overview of the ASC 606 framework, emphasizing how
Step 1: Identify the Contract interacts with subsequent steps (identifying performance obligations, determining transaction price, allocating price, and recognizing revenue). Participants will then explore the five criteria that must be met for a contract to exist:
The contract has been approved and parties are committed to perform their obligations.
2. Each party’s rights regarding goods or services can be clearly identified.
3. Payment terms can be clearly identified.
4. The contract has commercial substance.
5. It is probable the entity will collect substantially all of the consideration to which it is entitled.
The course also addresses special topics and practical challenges, such as:
• Contract combinations – identifying when multiple contracts entered into at or near the same time should be accounted for as a single arrangement.
• Contract modifications – distinguishing between modifications treated as new contracts and those that adjust existing contracts.
• Non-standard agreements – evaluating master service agreements, subscription arrangements, renewals, or framework contracts with undefined terms.
Participants will examine common pitfalls, including prematurely recognizing revenue on unenforceable contracts, failing to properly assess collectability, or misapplying guidance on contract modifications.
In addition to technical requirements, the program will highlight the disclosure requirements under ASC 606, particularly those related to significant judgments about contract identification, combining contracts, and modifications.
Who Should Attend
This course is designed for accounting and finance professionals, auditors, and compliance specialists involved in revenue recognition processes. It provides both the conceptual framework and practical application tools necessary to navigate one of the most judgment-intensive aspects of ASC 606.
Topics Covered
- Each criterion will be examined, with attention to areas of judgment and complexity:
- Approval and enforceability– evaluating written, oral, and implied agreements, as well as jurisdictional considerations regarding enforceable rights and obligations.
- Identification of rights and obligations – determining whether customary business practices create implicit enforceable rights.
- Payment terms – distinguishing between standard commercial terms, contingent consideration, and variable payment arrangements.
- Commercial substance – assessing whether the contract changes the entity’s future cash flows in a meaningful way.
- Collectability – evaluating customer creditworthiness, including considerations of partial payments, history of collection, and situations involving financially distressed customers.
Learning Objectives
- Explain the importance of properly identifying contracts under ASC 606 and how Step 1 influences the entire revenue recognition process
- Apply the five criteria for determining whether a contract exists
- Evaluate complex arrangements, including oral agreements, implied contracts, and contracts with variable terms
- Analyze when to combine multiple contracts and how to treat contract modifications
- Identify industry-specific issues and develop documentation that supports judgments made in contract assessments
- Strengthen financial reporting quality and compliance by aligning contract identification practices with ASC 606 requirements
Level
Update
Instructional Method
Group: Internet-based
NASBA Field of Study
Accounting (1 hour), Auditing (1 hour)
Program Prerequisites
Basic understanding of financial ratios
Advance Preparation
None
