What does contract asset mean on the CPA exam?
Contract asset. The right to consideration for goods or services already transferred, where the right still depends on something other than the passage of time. Once only time stands between the entity and payment it becomes a receivable, presented separately.
Defined against ASC 606-10-45-3.
Which CPA exam sections use contract asset?
Contract asset appears in the FAR section of the CPA exam.
Other terms defined against ASC 606-10
- contract liability: The obligation to transfer goods or services for which the customer has already paid, or for which payment is unconditionally due.
- performance obligation: A promise in a contract to transfer a distinct good or service.
- revenue recognition: Deciding when a sale becomes revenue.
- transaction price: The consideration an entity expects to be entitled to for transferring goods or services, excluding amounts collected for third parties such as sales tax.
- variable consideration: Any part of a contract price that is not fixed, such as a bonus, a discount or a refund.
Related terms
- right-of-use asset: The lessee's asset representing its right to use the leased item for the lease term.
- capital asset: For tax, almost everything a taxpayer owns EXCEPT inventory, receivables, and depreciable or real property used in a trade or business.
- deferred tax asset: A future tax saving created when an item is deducted for accounting before it is deducted for tax, or when a loss can be carried forward.
- consideration: The bargained-for exchange that makes a promise enforceable.
- goodwill: An asset representing the future economic benefits of acquired assets not separately identified, measured as consideration less identifiable net assets.
- accounts receivable: Amounts customers owe for goods or services already delivered.