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When either party to a contract has performed, an entity shall present the contract in the statement of financial position as a contract asset or a contract liability, depending on the relationship between the entity’s performance and the customer’s payment. An entity shall present any unconditional rights to consideration separately as a receivable.
Excerpt from ASC 606-10-45-3 [edits applicable upon adoption of ASU 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments]
A contract asset is an entity’s right to consideration in exchange for goods or services that the entity has transferred to a customer. An entity shall assess a contract asset for impairment in accordance with Topic 310 on receivables. [An entity shall assess a contract asset for credit losses in accordance with Subtopic 326-20 on financial instruments measured at amortized cost. A credit loss of a contract asset shall be measured, presented, and disclosed in accordance with Subtopic 326-20.]
Excerpt from ASC 606-10-45-4 [edits applicable upon adoption of ASU 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments]
A receivable is an entity’s right to consideration that is unconditional. A right to consideration is unconditional if only the passage of time is required before payment of that consideration is due…. An entity shall account for a receivable in accordance with Topic 310. […and Subtopic 326-20. Upon initial recognition of a receivable from a contract with a customer, any difference between the measurement of the receivable in accordance with Subtopic 326-20 and the corresponding amount of revenue recognized shall be presented as a credit loss expense.]
If a customer pays consideration or an entity has a right to an amount of consideration that is unconditional (that is, a receivable), before the entity transfers a good or service to the customer, the entity shall present the contract as a contract liability when the payment is made or the payment is due (whichever is earlier). A contract liability is an entity’s obligation to transfer goods or services to a customer for which the entity has received consideration (or an amount of consideration is due) from the customer.
Dr. Receivable
|
$5,000
|
|
Cr. Contract liability
|
$5,000
|
Dr. Cash
|
$5,000
|
|
Cr. Receivable
|
$5,000
|
Dr. Contract liability
|
$5,000
|
|
Cr. Revenue
|
$5,000
|
Dr. Receivable
|
$5,000
|
|
Cr. Revenue
|
$5,000
|
Dr. Cash
|
$5,000
|
|
Cr. Receivable
|
$5,000
|
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