ASC 606 contract review Services – XoraH PLLC

ASC 606 contract review Services

Intro to Services

The most expensive place to discover a revenue recognition problem is in the middle of an audit. By that point, the accounting has been recorded, management has signed off, and unwinding errors under auditor scrutiny is time-consuming, costly, and damaging to credibility. Our ASC 606 contract review services identify revenue recognition issues at the contract level — before they become audit findings — giving your team the time and flexibility to correct them properly.

We conduct systematic, contract-by-contract reviews of your customer agreements, applying the ASC 606 five-step model to assess whether revenue is being recognized in the right amount, at the right time, and under the right methodology. Each review is documented with technical conclusions your auditors can rely on.

what an ASC 606 contract review involves

A thorough ASC 606 contract review is more than reading the contract — it requires applying GAAP accounting judgment to the specific terms, pricing, and delivery mechanics of each agreement. Our review process covers:

Contract Identification and Combination

We assess whether the agreement meets the criteria for a contract with a customer under ASC 606 — including collectability of consideration — and evaluate whether multiple contracts with the same customer should be combined and accounted for as a single arrangement.

Performance Obligation Identification

Identifying distinct performance obligations is frequently the most consequential step in the analysis. We evaluate whether goods and services promised in the contract are distinct — both individually and in the context of the contract — and assess whether any promises should be combined into a single performance obligation or separated into multiple obligations with independent accounting.

Transaction Price Determination

We determine the transaction price, including the impact of variable consideration (discounts, refunds, rebates, performance bonuses, royalties), significant financing components, noncash consideration, and consideration payable to the customer. Where variable consideration is present, we assess the appropriate estimation method and evaluate the constraint.

Transaction Price Allocation

Where a contract contains multiple performance obligations, the transaction price must be allocated to each obligation based on relative standalone selling prices. We determine standalone selling prices using observable data where available and apply acceptable estimation methods — adjusted market assessment, expected cost plus margin, or residual approach — where direct observation is not possible.

Revenue Recognition Timing

We assess whether each performance obligation is satisfied over time or at a point in time, applying the ASC 606 criteria. For over-time obligations, we evaluate the appropriate method for measuring progress — output methods (units delivered, milestones reached) or input methods (costs incurred, labor hours). For point-in-time obligations, we identify the specific point at which control transfers to the customer.

Contract Modifications

Contract modifications — changes in scope, price, or both — require their own analysis under ASC 606. We assess whether a modification creates a separate contract, requires prospective accounting, or requires a cumulative catch-up adjustment, and advise on the correct treatment for each modification encountered.

When Contract Reviews Are Most Valuable

ASC 606 contract reviews deliver the most value in specific situations:

• Pre-audit preparation — identifying and correcting issues before auditors engage
• First-time audits or auditor transitions — establishing a clean revenue recognition baseline
• Acquisitions — reviewing the target’s contracts as part of due diligence or post-close accounting
• New contract types — when a company introduces a new pricing model, delivery mechanism, or customer arrangement
• Revenue restatements or audit findings — remediating identified issues across the contract population
• Investor or lender scrutiny — when revenue quality is under examination during a financing or sale process

What You Receive

At the conclusion of a contract review engagement, we deliver:

• A contract-level analysis for each reviewed agreement, documenting the five-step model conclusions
• A summary of revenue recognition issues identified, with recommended corrections
• Recommended accounting policy updates where current policies do not address reviewed contract types
• Adjusting journal entries for identified errors, with materiality assessment
• Documentation suitable for auditor review and reliance