Revenue recognition standards and Contracts

You can use the Contracts application to automatically recognize revenue using templates and schedules with complete support for ASC 606 and IFRS 15 guidance for revenue for contracts with customers.

The following table maps the five basic steps of the ASC 606 /IFRS 15 revenue recognition standard to the equivalent task in the Contracts application:

Recognition standard step	Task in Contracts
Identify the contract with a customer	Create a contract for the customer
Identify the performance obligations in the contract	Create the contract lines on the contract
Determine the transaction price	Enter the flat/fixed amount and other billing options for the contract line to determine the total amount
Allocate the transaction price to performance obligations	Create a multiple element arrangement (MEA) allocation that includes the applicable contract lines
Recognize revenue when (or as) the entity satisfies a performance obligation	Post revenue recognition according to the contract line's revenue schedule