According to FASB ASC 606, a company must account for a contract modification as a new contract if the
A) Goods or services are interdependent on each other
B) Promised goods or services are distinct
C) Company has the right to receive consideration equal to standalone price
D) Goods or services are distinct and company has right to receive the standalone price

Question

Quizplus · Accepted Answer

According to FASB ASC 606, a contract modification is accounted for as a new contract only when the goods or services are distinct, and the company has the right to receive consideration equal to the standalone price. Option A mentions interdependent goods or services, which means the modification does not create a distinct performance obligation, so it is not a new contract. Option B mentions distinct goods or services but does not have the standalone price requirement. Option C mentions the standalone price requirement but does not have the distinct goods or services requirement. Therefore, option D is the correct answer.

According to FASB ASC 606, a Company Must Account for a Contract