Revenue Recognition checklist for public software providers companies, in accordance with ASC 606
Contract Identification
Performance Obligations
Transaction Price
Allocation of Transaction Price
Revenue Recognition
- Identify the specific performance obligation.
- Confirm that the obligation is fulfilled as per contract terms.
- Ensure that the customer has received the promised goods or services.
- Document the completion of the performance obligation.
- Assess the nature of the performance obligation.
- Evaluate if control transfers over time or at a specific moment.
- Consider the method of measurement for revenue recognition.
- Document the rationale for timing decisions.
- Gather contracts, communications, and invoices.
- Maintain records of performance obligations fulfillment.
- Document any judgments or estimates made.
- Ensure all evidence is easily accessible for audits.
- Define what constitutes control in the context of the transaction.
- Review the contract for terms indicating control transfer.
- Assess any ongoing obligations that may affect control.
- Document findings related to control assessment.
- Identify any discounts, rebates, or incentives applicable.
- Estimate variable consideration using the expected value method.
- Document the rationale and calculations for estimates.
- Review the impact of variable considerations on revenue.
- Identify warranty clauses in contracts.
- Assess whether warranties affect the timing or amount of revenue.
- Document any adjustments made based on warranty evaluations.
- Ensure warranties are communicated to relevant stakeholders.
- Review software license agreements for control terms.
- Assess if updates or enhancements affect control transfer.
- Document any instances of control transfer related to updates.
- Ensure compliance with criteria outlined in ASC 606.
- Identify any changes made to existing contracts.
- Assess how modifications affect revenue recognition timing or amounts.
- Document the nature and rationale for modifications.
- Review implications of modifications on future revenue recognition.
- Map revenue recognition to the transfer of control.
- Review historical patterns of control transfer.
- Adjust revenue recognition practices as necessary.
- Document alignment assessments for transparency.
- Establish a process for ongoing monitoring of contracts.
- Identify indicators that may suggest a need for adjustments.
- Document any changes and their impact on recognized revenue.
- Communicate findings to relevant stakeholders.
- Review similar transactions for consistency in recognition.
- Establish guidelines to ensure uniform application.
- Document any discrepancies and their resolutions.
- Report findings to management for oversight.
- Schedule regular reviews of revenue recognition practices.
- Cross-check recognized revenue against financial statements.
- Document any inaccuracies and corrective actions taken.
- Communicate results of reviews to relevant parties.
- Identify areas where significant judgments were applied.
- Evaluate if additional disclosures are necessary for transparency.
- Document the rationale for any disclosures made.
- Ensure disclosures comply with ASC 606 requirements.
Use in Manifestly