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AN ALERT FROM THE BDO TECHNOLOGY & LIFE SCIENCES PRACTICE BDO KNOWS: SOFTWARE May 2015 www.bdo.com REVENUE FROM CONTRACTS WITH CUSTOMERS SOFTWARE INDUSTRY OVERVIEW In May 2014, the FAST issued ASU

How to fill out revenue from contracts with

To fill out revenue from contracts with, follow these steps:

1. Identify the contract: Begin by clearly identifying the specific contract for which you are reporting revenue. Gather all relevant information related to the contract, such as its duration, terms, and conditions.
2. Determine the revenue recognition method: Assess the appropriate revenue recognition method to use for the contract. This decision depends on the nature of the contract and any applicable accounting standards (e.g., ASC 606 for U.S. companies). Common methods include over time (percentage of completion) or at a point in time.
3. Calculate the transaction price: Determine the total transaction price for the contract by taking into account all agreed-upon consideration. This may include fixed fees, variable amounts, or any changes in the scope of work. Consider any potential discounts, rebates, or incentives that impact the revenue calculation.
4. Allocate the transaction price: Allocate the transaction price to the various performance obligations within the contract. A performance obligation refers to a distinct service or product that the entity has promised to transfer to the customer. Determine the standalone selling price of each performance obligation and allocate revenue accordingly.
5. Recognize revenue over time or at a point in time: Apply the revenue recognition method determined in step 2 to recognize revenue. If using the over time method, measure progress towards completion to determine the portion of revenue that can be recognized over time. If using the point in time method, recognize revenue when control of the performance obligation transfers to the customer.
6. Disclose relevant information: Provide appropriate disclosures relating to revenue recognition from contracts with customers. These disclosures may include qualitative and quantitative information about the nature, amount, timing, and uncertainty of revenue and cash flows.

Who needs revenue from contracts with?

Various entities and individuals require revenue from contracts with customers:

1. Businesses: All types of businesses, ranging from small enterprises to multinational corporations, need revenue from contracts with customers to report their financial performance accurately. This information is crucial for evaluating the company's financial health, making strategic decisions, and complying with accounting standards.
2. Investors and shareholders: Investors and shareholders rely on revenue information to assess the profitability and growth potential of a company. Revenue from contracts with customers provides insights into a company's ability to generate consistent income and deliver value to its customers.
3. Regulators and governmental agencies: Regulatory bodies and government agencies monitor revenue recognition practices to ensure compliance with accounting standards and regulations. These organizations may request revenue data to evaluate a company's financial statements, perform audits, or assess the industry's overall economic health.

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What is revenue from contracts with?

Revenue from contracts with refers to the income generated from agreements made with customers for providing goods or services.

Who is required to file revenue from contracts with?

Businesses and organizations that enter into contracts with customers are required to file revenue from contracts with.

How to fill out revenue from contracts with?

Revenue from contracts with should be filled out by providing detailed information about the agreements, such as the amount of revenue recognized, performance obligations, and transaction price.

What is the purpose of revenue from contracts with?

The purpose of revenue from contracts with is to accurately report the income earned from customer agreements and ensure transparency in financial reporting.

What information must be reported on revenue from contracts with?

Information that must be reported on revenue from contracts with includes the nature of the goods or services provided, transaction price, performance obligations, and any potential variable consideration.