What does contract liability mean on the CPA exam?
Contract liability. The obligation to transfer goods or services for which the customer has already paid, or for which payment is unconditionally due. Presented whenever the customer's payment runs ahead of the entity's performance.
Defined against ASC 606-10-45-2.
Which CPA exam sections use contract liability?
Contract liability appears in the FAR section of the CPA exam.
Other terms defined against ASC 606-10
- 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.
- 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
- deferred tax liability: The deferred tax consequences of taxable temporary differences: income already in the books that the return has not taxed yet, or a deduction taken on the return ahead of the books.
- lease liability: The lessee's obligation to make the remaining lease payments, measured at their present value.
- claim for refund: A formal request to get back tax already paid.
- accounts receivable: Amounts customers owe for goods or services already delivered.
- carryover basis: Basis that follows the property from the previous owner instead of resetting to what was paid.
- guaranteed payment: A payment to a partner for services or the use of capital, determined without regard to partnership income.