Under step 3 of ASC 606’s revenue recognition model, an entity may need to adjust its transaction price for the existence of a significant financing component (see Section 6.4). ASC 606-10-32-15 requires an entity to adjust the transaction price for the effects of the time value of money if the timing of payments agreed to by the parties to the contract provides the customer or the entity with a significant benefit of financing the transfer of goods or services to the customer (see Section 6.3). In those circumstances, the contract contains a significant financing component.
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