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Any noncash consideration received from a customer needs to be included when determining the transaction price. Noncash consideration is measured at fair value. This is consistent with the measurement of other consideration that considers the value of what the selling reporting entity receives, rather than the value of what it gives up.
Management might not be able to reliably determine the fair value of noncash consideration in some situations. The value of the noncash consideration received should be measured indirectly in that situation by reference to the standalone selling price of the goods or services provided by the reporting entity.

4.5.1 Measurement date for noncash consideration

ASC 606 specifies that the measurement date for noncash consideration is contract inception, which is the date at which the criteria in RR 2.6.1 are met. Changes in the fair value of noncash consideration after contract inception are excluded from revenue. Management should also consider the accounting guidance in ASC 815, Derivatives and Hedging, to determine whether an arrangement with a right to noncash consideration contains an embedded derivative.
Management should apply the applicable guidance to account for noncash consideration upon receipt. For example, financial instruments guidance would apply if the consideration is in the form of shares. It might be necessary to recognize an immediate impairment if the noncash consideration is received after contract inception and the value of the noncash consideration has subsequently decreased. If a reporting entity satisfies a performance obligation in advance of receiving noncash consideration, management should consider whether the resulting contract asset or receivable is impaired if the value of the noncash consideration subsequently decreases.
Example RR 4-20 illustrates the accounting for noncash consideration. This concept is also illustrated in Example 31 of the revenue standard (ASC 606-10-55-248 through ASC 606-10-55-250).
EXAMPLE RR 4-20

Noncash consideration – determining the transaction price
Security Inc enters into a contract to provide security services to Manufacturer over a six-month period in exchange for 12,000 shares of Manufacturer’s common stock. The contract is signed and work commences on January 1, 20X1. The performance is satisfied over time and Security Inc will receive the shares at the end of the six-month contract. For purposes of this example, assume that the arrangement does not include a derivative.

How should Security Inc determine the transaction price?
Analysis
Security Inc should measure the fair value of the 12,000 shares at contract inception (that is, on January 1, 20X1). Security Inc will measure its progress toward complete satisfaction of the performance obligation and recognize revenue each period based on the fair value determined at contract inception. Security Inc should not reflect any changes in the fair value of the shares after contract inception in revenue. Security Inc should, however, assess any contract asset or receivable for impairment in accordance with the guidance on receivables. Security Inc will apply the relevant financial instruments guidance upon receipt of the shares to determine whether and how any changes in the fair value that occurred after contract inception should be recognized.

4.5.2 Variability related to noncash consideration

Changes in the fair value of noncash consideration can relate to the form of the consideration or to other reasons. For example, an entity might be entitled to receive equity of its customer as consideration, and the value of the equity could change before it is transferred to the entity. Changes in the fair value of noncash consideration that are due to the form of the consideration are not subject to the constraint on variable consideration.
Noncash consideration that is variable for reasons other than only the form of the consideration is included in the transaction price, but is subject to the constraint on variable consideration. For example, a reporting entity might receive noncash consideration upon reaching certain performance milestones. The amount of the noncash consideration varies depending on the likelihood that the reporting entity will reach the milestone. The consideration in that situation is subject to the constraint, similar to other variable consideration.
Judgment may be needed to determine the reasons for a change in the value of noncash consideration, particularly when the change relates to both the form of the consideration and to the reporting entity’s performance. ASC 606 specifies that if there is variability due to both the form of the consideration and other reasons, a reporting entity should apply the variable consideration guidance only to the variability resulting from reasons other than the form of the consideration.
Example RR 4-21 illustrates variability that results for reasons other than the form of the consideration.
EXAMPLE RR 4-21

Noncash consideration – variable for reasons other than the form of the consideration
MachineCo enters into a contract to build a machine for Manufacturer and is entitled to a bonus in the form of 10,000 shares of Manufacturer common stock if the machine is delivered within six months. MachineCo does not have a history of building similar machines within six months and cannot conclude that it is probable that a significant reversal will not occur with regards to the bonus. For purposes of this example, assume that the arrangement does not include a derivative.
How should MachineCo account for the noncash bonus?
Analysis
MachineCo should consider the guidance on variable consideration since the consideration varies based on whether the machine is delivered by a specific date. MachineCo should not include the shares in the transaction price as the amount of variable consideration is constrained. MachineCo should update its estimate each period to determine if and when the shares should be included in the transaction price.

4.5.3 Noncash consideration provided to facilitate fulfillment

Noncash consideration could be provided by a customer to a reporting entity to assist in completion of the contract. For example, a customer might contribute goods or services to facilitate a reporting entity's fulfillment of a performance obligation. A reporting entity should include the customer's contribution of goods or services in the transaction price as noncash consideration only if the reporting entity obtains control of those goods or services. Assessing whether the reporting entity obtains control of the contributed goods or services could require judgment.
Example RR 4-22 and Example RR 4-23 illustrate noncash consideration provided by a customer to assist a reporting entity in fulfilling the contract.
EXAMPLE RR 4-22

Noncash consideration – materials provided by customer to facilitate fulfillment
ManufactureCo enters into a contract with TechnologyCo to build a machine. TechnologyCo pays ManufactureCo $1 million and contributes materials to be used in the development of the machine. The materials have a fair value of $500,000. TechnologyCo will deliver the materials to ManufactureCo approximately three months after development of the machine begins. ManufactureCo concludes that it obtains control of the materials upon delivery by TechnologyCo and could elect to use the materials for other projects.
How should ManufactureCo determine the transaction price?
Analysis
ManufactureCo should include the fair value of the materials in the transaction price because it obtains control of them. The transaction price of the arrangement is therefore $1.5 million.
EXAMPLE RR 4-23

Noncash consideration — processing arrangements
WireCo enters into an arrangement with CopperCo to process raw copper into finished wire for CopperCo. CopperCo provides WireCo raw copper with a fair value of $500,000 that is used in the fabrication of the wire and pays WireCo $1 million in cash. CopperCo retains title to the copper as it is processed and CopperCo has concluded the arrangement is not a lease.
How should WireCo determine the transaction price?
Analysis
WireCo would likely conclude that it is providing a service of processing the copper and that it does not obtain control of the copper in this arrangement. Therefore, WireCo should not include the fair value of the raw materials in the transaction price. Judgment may be required in some fact patterns to determine whether a reporting entity obtains control of customer-provided materials. If a reporting entity concludes they obtain control then they would likely include the fair value of the noncash consideration in the transaction price.
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