Revenue Recognition Disclosure Requirements: Contracts with Customers
Author: Lynn Fountain
| CPE Credit: |
2 hours for CPAs |
Investors and other financial statements have provided comments to the SEC on revenue-related disclosures. They felt the standard did not provide sufficient detail to perform detailed analysis.
One of the goals of the new standard is to introduce disclosure requirements that improve the information communicated in financial statements.
The new standard requires additional disclosures to better communicate the nature, amount, timing, and uncertainty of an entity’s revenue and cash flows (ASC 606-10-50-1). Filers are required to provide qualitative and quantitative information about the following:
- Contracts with customers
- Significant judgments made in applying the new standard
- Assets recognized from the costs to obtain or fulfill a contract
An entity is required to disclose revenue recognized from contracts with customers as well as impairment losses on any contract assets arising from those contracts. Disclosure is required unless these amounts are presented separately on its financial statements.
Publication Date: May 2025
Designed For
Controllers, Accountants, Auditors, Tax Professionals
Topics Covered
- Disclosure Requirements
- Disaggregation
- Contract Balances
- Performance Obligations
- Remaining Performance Obligations
- Practical Expedient
- Disclosure of Transaction Price Allocated to Remaining Performance Obligations
- Disclosure of Significant Judgements
- Transaction Price
- Defining Contract Assets and Contract Liabilities
- Contract Assets and Contract Liability Disclosures
- Accounting Policies
Learning Objectives
- State why more robust disclosure requirements are needed
- List components of contract balances required to be disclosed
- List components of performance obligations required to be disclosed
- List components of significant judgements that must be disclosed
- List components of transaction prices that must be disclosed
- Identify assets recognized from costs to obtain or fulfill a contract that must be disclosed
- Identify components that must be reported in interim reporting
Level
Intermediate
Instructional Method
Self-Study
NASBA Field of Study
Accounting (1 hour), Business Management & Organization (1 hour)
Program Prerequisites
Understanding of ASC Topic 606 – Contracts with Customers
Advance Preparation
None
