Determining Performance Obligations When Implementing the New Revenue Recognition Standards

One of the most challenging parts of the new standards may be determining how many performance obligations you have.  Where you previously had more than one “contract” on your job cost schedule, you may now have one.  Conversely, you may have previously reported one contract, but under the new standard, it needs to be split into more than one “performance obligation”.

What do you need to consider in determining how many performance obligations you have upon implementation of the new standards in 2019? Here are six key questions to ask:

  • Are there contracts with more than one performance obligation?
  • Are there contracts with the same customer that must be combined and accounted for as one performance obligation?
  • Who is reading the contracts and assessing them to determine if there is one or more performance obligations?
  • Who is assigning the values to the separate performance obligations if you determine there is more than one?
  • What changes need to be made in the system to properly account for the performance obligations?
  • Do any changes need to be made in internal controls to properly account for determining performance obligations?

Considering these unique factors can help illustrate your company’s implementation preparedness in this area. KatzAbosch has individuals experienced in contractor issues and trained in process improvement using lean six sigma principles that can help you through this transition. If you have any questions about this information please contact your KatzAbosch representative; or contact us by clicking here.

Related Resources

News, Tips & Insights Sign-Up to Receive Updates

Enter your email address to subscribe to our digest of accounting and firm news.

  • This field is for validation purposes and should be left unchanged.