Revenue Recognition: Input Method for Recognizing Revenue Over Time
ASC 606 adds specific guidelines for how the construction industry must account for uninstalled goods or services. Under Topic 606, uninstalled goods or services may be recorded as job cost on the WIP, but at zero margin. The margin is recognized over time as the materials are transferred to the customer.
When making the assessment of when control of the goods or services passes to the customer, contractors must use significant judgement based on the facts and circumstances of the particular contract.
Keep in mind that while both the input and output methods are acceptable for measuring transfer of control to the customer, the chosen method must remain in place until the performance obligation is completed.
To help you stay in compliance with revenue recognition standards, save this Construction Issue Sheet.