Recognize a contract liability (deferred revenue) when cash is received or invoiced before the performance obligation is satisfied
Recognize a contract asset when revenue is recognized before the customer is billed and the right to payment is conditional on something other than the passage of time
Distinguish contract assets from unconditional accounts receivable: AR arises when only the passage of time is required for payment; a contract asset arises when further performance is required
Roll forward the deferred revenue balance each period: beginning balance + new deferrals — amounts recognized = ending balance; reconcile to the GL
For long-term contracts, present current and non-current portions of contract assets and liabilities on the balance sheet
Disclose the amount of revenue expected to be recognized from unsatisfied (or partially unsatisfied) performance obligations, with quantitative breakdowns required under ASC 606-10-50-13
Known gotchas
Contract assets and contract liabilities should be presented net only if they arise from the same contract; offsetting across unrelated contracts is not permitted
Deferred revenue roll-forward disclosures are required; failure to provide an opening-to-closing reconciliation is a common SEC comment area
In a business combination, acquired deferred revenue is measured at fair value (not the historical deferred amount), which can significantly reduce the revenue recognized post-acquisition compared to the seller's expectation
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claude mcp add --transport http waymark https://mcp.waymark.network/mcp