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Chapter 4 — Step 1: Identify the Contract

4.3 Criteria for Identifying a Contract With a Customer

4.3 Criteria for Identifying a Contract With a Customer

As shown below, ASC 606-10-25-1 provides criteria that an entity should evaluate at contract inception to determine whether an arrangement should be accounted for under the revenue standard.

Footnotes

1
Quoted from paragraph BC36 of ASU 2014-09.
2
ASC 845 addresses purchases and sales of inventory with the same counterparty and the circumstances in which nonmonetary exchanges of inventory in the same line of business are recognized at the carrying amount of the inventory transferred.
3
As noted in Appendix A, the collectibility threshold under U.S. GAAP differs from that under IFRS Accounting Standards.
4
The IASB did not amend IFRS 15 to clarify the Board’s intent with respect to collectibility. However, the FASB and IASB do not expect significant differences in application. See Appendix A for a summary of differences between U.S. GAAP and IFRS Accounting Standards on revenue-related topics.
5
See ASC 326-10-65-1 through 65-5 for effective date and transition guidance related to ASC 326.