Revenue for Specific Arrangements

Long-term contracts

• Cost-to-cost: costs to date ÷ total estimated costs × price; current revenue = cumulative − prior.
• Estimate changes: cumulative catch-up.
• Loss contract: recognize full loss immediately.

Licenses

Functional (software, films) → point in time. Symbolic (brands, franchises) → over time. Sales- or usage-based royalties → when sales or usage occur.

Repurchase agreements

Seller forward or call → lease (price lower) or financing (price same or higher). Customer put with significant incentive → lease or financing; otherwise sale with right of return.

Other

• Consignment: no revenue until the consignee sells.
• Bill-and-hold: substantive reason, identified, ready, can't be redirected.
• Material right → separate performance obligation.
• Upfront fees → defer.
• Principal (controls before transfer) → gross; agent → net.

Modifications

Distinct at standalone price → separate contract · distinct otherwise → prospective · not distinct → catch-up.

Exam traps

• A franchisor's initial fee for access to its brand is recognized over the franchise term, unless it relates to distinct goods or services.
• Breakage on gift cards: recognize it in proportion to redemptions if expected; otherwise only when redemption becomes remote.
• An option to buy more goods at their standalone selling price isn't a material right.
• Cost-to-cost progress excludes wasted costs and uninstalled materials that don't reflect performance.