Once all of the steps are completed in the framework of the FASB Accounting Standard concerning the Revenue from Contracts with Customers, then businesses can completely recognize the revenue. This final step recognizes revenue when or as the performance obligations are completed.
Previously, we addressed Steps 1, 2, and 3 of the Accounting Standard Update (ASU) No. 2014-19, Revenue from Contracts with customers. This post moves on to Step 4, allocating the transaction price to the performance obligations in the contract. This, and one final, step addresses when and how much revenue should be recognized from business contractual obligations.
Revenue from Contracts with Customers, ASU 2014-09, provides framework for businesses to gather revenue and know when and how to report revenue. We have a series of posts concerning the framework laid out in the accounting update; previous posts can be found on the introduction, Step One, and Step Two of this update. We continue now with Step Three: Determining the Transaction Price. This step contains provisions which vary from current accounting principles in the U.S. thus alterations in accepted accounting practices may be necessary.