Identify the Contract with the Customer
The first step in applying the framework is to identify the contract with the customer (similar analysis in determining evidence of a revenue arrangement). Accounting guidance will include all contracts that create enforceable rights for the seller to receive cash or other assets for the delivery of products or services or right to use assets to the buyer will apply the framework. The contract may be written, oral, or implied by the company’s business practices. In determining whether a contract exists, companies will apply the following criteria:1
1. The contract has commercial substance (i.e., the risk, timing, or amount of the entity’s future cash flows is expected to change as a result of the contract). ...
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