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Wiley Revenue Recognition plus Website by Joanne M. Flood

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7Contract Costs

  1. Overview
  2. Incremental Costs of Obtaining a Contract
    1. Recoverability
    2. Determining when Costs are Incremental
    3. Costs that are Not Incremental
      1. Direct Response Advertising Costs
      2. Other Marketing-Related Costs
    4. Practical Expedient
    5. Example 7.1: Costs of Obtaining a Contract—Commissions, Bonuses
    6. Example 7.2: Costs of Obtaining a Contract—Travel, Due Diligence
  3. Costs of Fulfilling a Contract
    1. Scope Exceptions
    2. Three Criteria for Recognizing Assets for Costs of Fulfilling a Contract
    3. Categories of Fulfillment Costs
    4. Example 7.3: Costs that Create an Asset
    5. Setup Costs
    6. Abnormal Costs
  4. Amortization of Costs
    1. Example 7.4: Costs—Recognition and Amortization
    2. Example 7.5: Costs—Amortization and Contract Extension
  5. Impairment Loss
  6. Comparison with Legacy Guidance
    1. Cost of Obtaining a Contract
      1. IFRS
      2. U.S. GAAP
    2. Costs of Fulfilling a Contract
      1. IFRS
      2. U.S. GAAP
    3. Amortization
      1. U.S. GAAP
    4. Impairment
      1. IFRS and U.S. GAAP

Overview

In addition to providing revenue recognition guidance for contracts with customers, the Standard also contains guidance for costs related to obtaining and fulfilling contracts with customers that are in the scope of the Standard. This guidance is codified in U.S. GAAP in a subtopic added by the Standard, ASC 340-40, Contracts with Customers, and can be found in IFRS 15.91-104.

The guidance on contract costs in ASC 340-40 and IFRS 15.91-104 covers

  • incremental costs of obtaining a contract, and
  • costs incurred to fulfill a contract.

It also covers

  • amortization of ...

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