In short
A contract asset is a company's right to consideration for goods or services it has already transferred, when that right is still conditional on something other than the passage of time, such as completing another part of the contract.
Key takeaways
- Once the right to payment becomes unconditional, it is reclassified as a receivable.
- It is the mirror image of a contract liability, where payment comes before performance.
- Contract assets and liabilities in the same contract are presented net.
Where it's tested
FAR: Revenue Recognition — study notes, a five-minute revision sheet and practice questions.
Practise: 3 questions
Question 1 of 3 · 0 answered
What distinguishes a contract asset from a receivable under ASC 606?