Revenue Recognition Review Checklist Template (ASC 606 & IFRS 15)

Phase 1: Contract Intake & Scope

Owned by the revenue accountant. The scope questions decide which later phases this review shows.

• Log the contract and name the deal owner, revenue accountant, controller and CFO — every later task is assigned from these fields
• Attach the full contract set — master agreement, order forms, statements of work, amendments, side letters and any email that changes terms
• Check for contracts that must be combined — with the same customer, at or near the same time, negotiated as a package or with linked prices
• Answer the scope questions — is this a modification of an existing contract, may any obligation be satisfied over time, and are there non-standard terms or a value above the review threshold
• Record the framework and the policy elections that apply — ASC 606, IFRS 15 or FRS 102 Section 23, and the practical expedients the company has adopted

Phase 2: Contract Modification

Shown only when the contract changes the scope or price of an existing one. Classify the modification first, because it decides what the later steps are applied to.

• Confirm the modification is approved and enforceable — in writing, orally or by customary business practice, including unpriced change orders
• Test whether it is a separate contract — distinct goods or services added, at a price that reflects their standalone selling prices
• If not, choose the method — treat it as a termination and new contract when the remaining goods or services are distinct, or as a cumulative catch-up when they are not
• Link this review to the original contract review — so the history of judgements on the customer stays in one trail
• Quantify the effect on revenue already recognised — any catch-up is recorded in the period of the modification

Phase 3: Contract & Performance Obligations

• Confirm a contract exists — approved, rights and payment terms identifiable, commercial substance and collection probable
• Determine the enforceable contract term — termination-for-convenience clauses can make it much shorter than the stated term
• List every promise, including implied ones — set-up, training, support, updates, and customer options that may be material rights
• Test each promise for distinctness — capable of being distinct and distinct in the context of the contract
• Assess principal versus agent for anything a third party provides — whether you control the good or service before it reaches the customer
• Classify each licence — a right to access recognised over time, or a right to use recognised at a point in time
• Test each performance obligation against the three over-time criteria — including whether a right to payment for work to date is enforceable

Phase 4: Transaction Price & Allocation

• Separate fixed from variable consideration — discounts, rebates, refunds, credits, price concessions, bonuses, penalties and usage fees
• Estimate variable consideration — using the expected value or the most likely amount, whichever better predicts the outcome
• Apply the constraint and document the reasoning — include only what is unlikely to reverse significantly when the uncertainty resolves
• Check for a significant financing component, non-cash consideration or payments to the customer — each changes the transaction price
• Determine standalone selling prices — observable prices first, otherwise adjusted market assessment, expected cost plus margin, or the residual approach where allowed
• Allocate the price and any discount — on relative standalone selling prices, unless the criteria for allocating to specific obligations are met

Phase 5: Over-Time Measurement

Shown only when at least one performance obligation is satisfied over time.

• Choose an output or input method for each obligation — the one that best depicts transfer of control, applied consistently to similar obligations
• Exclude inputs that do not depict progress — uninstalled materials, wasted effort and costs from inefficiencies
• Fall back to cost recovery where progress cannot yet be measured — revenue only to the extent of costs expected to be recovered
• Update the measure of progress at each reporting date — changes are changes in estimate, booked as a cumulative catch-up
• Assess whether the contract is loss-making — IAS 37 under IFRS, ASC 605-35 for construction- and production-type contracts under US GAAP

Phase 6: Recognition, Contract Costs & Approval

• Identify when control transfers for point-in-time obligations — right to payment, legal title, physical possession, risks and rewards, and customer acceptance
• Review bill-and-hold, consignment, acceptance and repurchase terms — each can delay or prevent recognition
• Set up the revenue schedule and compare it with the billing schedule — the difference is the contract asset or contract liability
• Account for contract costs — capitalise incremental costs of obtaining the contract, such as commissions, unless an expedient or policy choice applies
• Capture the disclosure data — disaggregation category, contract balances, and remaining performance obligations with expected timing
• Write the contract review memo — conclusion and evidence for each step, attached to this task
• Controller approval of the revenue treatment — required before revenue is recognised on the contract