The objectives of this case are two-fold: (1) to understand, in general, the official revenue recognition criteria codified in the Financial Accounting Standard Board’s (FASB) Topic 606; and (2) to find, within an array of typical 10-K disclosures, the information one company in the software-as-a-service (SaaS) industry provides regarding Topic 606.


Put yourself in Maria’s role and pursue the various tasks that she has assigned herself. Prepare a brief description/answer to each of the tasks and submit your answers in eLC. In addition, be prepared to articulate during class discussion the results and insights stemming from your efforts in that regard.

Maria’s Tasks:

  1. Identify and articulate’s primary business activities and revenue lines.
  2. Identify and explain the FASB’s five revenue steps.
  3. Understand and explain the notion of “consideration the Company expects to receive” as it relates to the revenue recognition steps – specifically, how would possible discounts or contingent payments factor into determining “expected consideration?”
  4. What is the significance of the Company’s use of the terminology “performance obligation,” and in particular, what are “remaining performance obligations?” What is the significance of those customer sales contracts that refers to as containing “multiple performance obligations,” and what is the revenue-related accounting applied to them?
  5. Understand and explain what is represented by the Company’s “contract assets.” Was there a parallel construct on the liability side of the balance sheet?
  6. At what point in time are accounts receivable increased and decreased by the company?
  7. Why does prorate some revenues over time and not others? On what basis is that prorating done?
  8. How was the income statement’s “cost of revenues” figure determined?
  9. What did the company mean by the “full retrospective method?” Was there any financial statement related impact? If so, where and what amount?

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