B2W Flipbooks

Page | 12 ACS 606-10-25-21 includes a non-exclusive (i.e. not complete) list of considerations to be evaluated by the contractor to determine whether or not a promise is distinct in the context of the contract, such that it would require separate revenue recognition from other promises within the contract. The considerations described in ASC 606-10-25- 21 that indicate two or more promises to transfer goods and services are not separately identifi able (and therefore not distinct in the context of the contract) are as follows: • The contractor provides a signifi cant service of integrating goods or services to provide a combined output contracted for by the customer, or • One or more of the goods or services signifi cantly modifi es or customizes one or more of the other goods or services in the contract, or • The goods or services are highly interdependent or highly interrelated. In many engineering and construction contracts, the fi nished deliverable is constructed in a number of phases (for example, front-end engineering and design, detailed engineering, procurement, fabrication, construction or construction management, and validation or start-up) that each include goods or services that normally provide benefi t to the customer on their own or together with other readily available resources. Therefore, the contractor's evaluation regarding whether a promised good or service is or is not distinct will likely depend more on an evaluation of the criteria in ASC 606-10-25-19(b), that is, whether those goods or services are distinct within the context of the contract. Moreover, a good or service is not separable from other promises in the contract when an entity provides an integration service to incorporate individual goods and/or services into a combined output. This may be relevant in many construction contracts if a contractor provides an integration service to manage and coordinate the various construction tasks and to assume the risks associated with the integration of those tasks. An important factor for determining that goods or services should be combined with an integration service into a single performance obligation is that the risk the entity assumes in performing the integration service is inseparable from the risk relating to the transfer of the other promised goods or services. The judgment about the risk an entity assumes with respect to a promised good or service can often be inferred by certain terms of the contract, such as the contract's acceptance or warranty provisions. For example, if the contract specifi es that the entity is warranting that a promised good or service will meet certain specifi cations, then it may suggest that an output of the contract is that particular good or service. Assessing Multiple Performance Obligations (continued) >

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