U.S. GAAP Codification of Accounting Standards Guide by AccountingINFO.com

U.S. GAAP Codification of Accounting Standards

U.S. GAAP Codification

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Accounting Standards, ASC

U.S. GAAP Accounting Standards
Codification Topic 605-25: Revenue Recognition
Multiple-Element Arrangements

Principles of Accounting, Intermediate Financial Accounting, U.S. GAAP Textbook

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Securities Law Library, Accounting by Topic, Accounting Terms Dictionary

Codification Topic 605-25
Revenue Recognition
Multiple-Element Arrangements

Revenue Recognition

ASC 605-25 was updated by ASU 2009-13
--> to reflect the contents of EITF 08-1

EITF Issue No. 08-1
"Revenue Recognition with Multiple Deliverables
--> EITF No. 08-1 superseded EITF No. 00-21

EITF Issue No. 00-21
"Revenue Recognition with Multiple Deliverables

General Principles

1. Multiple-Deliverable Revenue Arrangements (MDRA)
--> divided into separate units of accounting
--> if two conditions listed in ASC 605-25-25-5 are satisfied

[Note]
EITF 00-21 had three conditions.
EITF 08-1 deleted one condition.

2. Arrangement consideration is allocated
--> based on the relative selling prices
--> "relative selling price method"

[Note] EITF 00-21 used the "relative fair value method"

Two conditions for a separate unit of accounting

1. Delivered items have value to the customer
--> on a standalone basis

2. Delivery of undelivered items is
--> considered probable and
--> under the substantial control of the vendor

[Note]
EITF 00-21 had one more condition that was deleted by EITF 08-1
--> Undelivered items should have
--> the objective and reliable "evidence of fair value"

Relative selling price method adpted by EITF 08-1 (ASU 2009-13)

Arrangement consideration is allocated
--> at the inception of the arrangement
--> based on their "relative selling prices"

Selling price is determined using
--> the "Vendor Specific Objective Evidence" (VSOE) of selling price

If VSOE does not exist
--> use the "Third-Party Evidence" (TPE) of selling price

If both VSOE and TPE are not available
--> use the "best estimate" of selling price

Examples of EITF 08-1

1. Cellular telephone contract
2. Can manufacturing equipment
3. Standard equipment installation
4. Automobiles sold with lifetime maintenance services
5. Sale of home appliances with installation and maintenance services
6. Human resources outsourcing services
7. Sale of medical equipment with cartridges and installation
8. Sale of computer system
9. Sale of 12 bolts of fabric
10. Painting contract
11. Agricultural equipment

International Financial Reporting Standards (IFRS)

IAS 18: Revenue

Codification Topic 605
Revenue Recognition

Subtopics of Codification Topic 605

   605-10 Overall
   605-15 Products
   605-20 Services
   605-25 Multiple-element arrangements
   605-30 Rights to use
   605-35 Construction-type and production-type contracts
   605-40 Gains and losses
   605-45 Principal agent considerations
   605-50 Customer payments and incentives

Accounting Terms of Codification Topic 605-10

Readily convertible to cash

Accounting Terms of Codification Topic 605-15

Warranty

Accounting Terms of Codification Topic 605-20

   Extended warranty
   Product maintenance contracts
   Retrospective insurance arrangements
   Separately priced contracts

Accounting Terms of Codification Topic 605-25

Accounting Terms of Codification Topic 605-30

Accounting Terms of Codification Topic 605-35

   Contractor
   Cost-plus-award-fee contract
   Cost-plus-fixed-fee contract
   Cost-plus-incentive-fee contract (incentive based on cost)
   Cost-plus-incentive-fee contract (incentive based on performance)
   Cost-sharing contract
   Cost-type contracts
   Cost-without-fee contract
   Firm fixed-price contract
   Fixed-price contract with economic price adjustment
   Fixed-price contract providing for firm target cost incentives
   Fixed-price contract providing for performance incentives
   Fixed-price contract providing for prospective periodic redetermination of price
   Fixed-price contract providing for retroactive redetermination of price
   Fixed-price contract providing for successive target cost incentives
   Fixed-price level-of effort term contract
   Fixed-price contracts
   Profit center
   Time-and-material contracts
   Unit-price contracts

Accounting Terms of Codification Topic 605-40

Accounting Terms of Codification Topic 605-45

Handling costs
Shipping costs

Accounting Terms of Codification Topic 605-50

   Breakage
   Buydowns
   Cash consideration
   Consideration
   Cooperative advertising
   Customer
   Reseller
   Slotting fees
   Vendor

Other Topics at the Codification 600

Accounting Standards Codification, ASC, Overview

ASC Codification Topic 605: Revenue Recognition

Topic 605 is the only topic at the 600 level.

U.S. GAAP Codification of Accounting Standards

Accounting Standards Codification, ASC, Overview

ASC Codification 200: Presentation

ASC Codification 300: Assets

ASC Codification 400: Liabilities

ASC Codification 500: Equity

ASC Codification 600: Revenue

ASC Codification 700: Expenses

ASC Codification 800: Broad Transactions

ASC Codification 900: Industry

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