APPENDIX D
(FASB ASC TOPIC 606)
When the Auditors Hit the Field
>> STEP 1
Does the contract have more than one performance obligation?
>> STEP 2
How does the contract transfer control to the
customer?
Over a period of time.
At a specific point in time.
Both (indicating at least two performance obligations).
>> STEP 3
Does the contract provide for liquidated damages or other penalty provisions?
>> STEP 4
Describe types of variable consideration provided in the contract and apply the steps of the variable consideration section
previously outlined.
>> STEP 5
Compile a list of change orders to the contract, describe the nature of each and apply the steps of change order section
previously outlined.
>> STEP 6
Describe the retention terms.
>> STEP 1
Consider whether the contracts were entered into at or near the same time and with the same customer. If both, proceed to
step 2.
>> STEP 2
Are the contracts interdependent, based on
the presence of at least one of the following
conditions:
• The contracts are negotiated as a package
with the same commercial objective.
• The amount of consideration to be paid under
one contract depends on the performance
under the other contract or the price of the
other contract.
• The goods and services in the separate
contracts are considered a single-
performance obligation.
Yes: Stop here. The contracts should be combined.
No: Stop here. The contracts should not be combined.
CONTRACTOR’S REMINDER CHECKLIST | 7