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ASC 606 Input Method with Uninstalled Materials (Revenue at Cost)

What do the numbers come to once the work is shown?

Cost-to-cost progress with uninstalled materials excluded and recognized at zero margin under ASC 606-10-55-21(b).

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Your figures
Example figuresIllustrative only. Type over them with your own.
Revenue to date
$2,200,000
Uninstalled materials recognized at zero margin
Measure of progress excluding materials
20.00%
Revenue on the materials (at cost)
$1,500,000
Drawn to one scale
Revenue to date$2,200,000
Revenue on the materials (at cost)$1,500,000
Gross profit to date$200,000
Revenue if materials were not excluded$2,500,000
All results
MeasureResult
Revenue to date$2,200,000
Measure of progress excluding materials20.00%
Revenue on the materials (at cost)$1,500,000
Gross profit to date$200,000
Revenue if materials were not excluded$2,500,000
Input check
Costs incurred lie between materials cost and total costs
How this was worked out
Work shownrecomputed as you type
Progress = (costs incurred - materials) / (total costs - materials)
Revenue = progress x (price - materials) + materials

Illustrative arithmetic on the figures you enter. Check the result against your firm's methodology before relying on it.

The formulas

  • Progress = (costs incurred - materials) / (total costs - materials)
  • Revenue = progress x (price - materials) + materials

How it works

ASC 606-10-55-21(b) adjusts a cost-based input method when a cost is not proportionate to progress. Revenue on such a good is recognized at its cost when the good is not distinct, the customer is expected to obtain control of it significantly before receiving services related to it, the cost is significant to the total, and the entity procures it from a supplier without significant involvement in designing or manufacturing it.

The example uses the figures in ASC 606-10-55-187 to 55-192: a $5 million refurbishment with $1.5 million of elevators gives 20 percent progress and $2.2 million of revenue.

Illustrative figures only. Check the result against your firm's methodology before relying on it.

Common questions

Why zero margin on the materials?

Margin on goods procured and passed through would overstate performance. The margin is earned on the remaining work.

Do wasted materials count as progress?

No. ASC 606-10-55-21(a) excludes costs of significant inefficiencies not reflected in the price.

What happens after installation?

The materials cost stays out of the measure of progress and the revenue on them stays equal to their cost. The margin is earned only on the remaining work.

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.

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