The formulas
- Progress = units delivered / total units
- Cumulative revenue = progress x transaction price
- Period revenue = cumulative revenue - prior revenue
How it works
Output methods measure progress by the value transferred to the customer: surveys of performance, milestones reached, units produced or delivered (ASC 606-10-55-17). A change in the measure of progress or the transaction price is a change in estimate, recorded as a cumulative catch-up in the period.
ASC 606-10-55-17 also states that units produced or delivered do not faithfully depict performance when work in process or finished goods controlled by the customer at period end are left out of the count.
Illustrative figures only. Check the result against your firm's methodology before relying on it.
Common questions
When is units delivered not a faithful measure?
When significant work in process or finished goods controlled by the customer are excluded from the count.
Can I use the right-to-invoice expedient?
ASC 606-10-55-18 allows revenue equal to the amount invoiceable when that amount corresponds directly to the value of performance completed.
What if cumulative revenue is below prior revenue?
The period revenue is negative: a reversal through the catch-up.
Sources
Runs in your browser. The figures you type are not sent to CORAA or stored. Check the result against your firm's methodology before relying on it.