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Chapter 4 — Foreign Currency Transactions

4.8 Contract Assets and Contract Liabilities

4.8 Contract Assets and Contract Liabilities

ASC 606 requires the recognition of a (1) contract asset if an entity transfers goods or services to a customer before the customer pays consideration or before payment is due or (2) contract liability if an entity receives consideration (or had an unconditional right to consideration) before it transfers goods or services to the customer. This requirement is similar to the requirement under the legacy guidance in ASC 605-35 related to the recognition of costs in excess of billings or billings in excess of costs.

Footnotes

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ASU 2016-20 clarifies that contract liabilities under ASC 606 are different from refund liabilities. Unlike contract liabilities, refund liabilities are monetary liabilities and therefore must be remeasured by using current exchange rates.