Revenue Partner Pros
Sample Deliverable
ASC 606 / Revenue Recognition
Contract Alignment Analysis
Multi-Element Arrangement — Hardware, Software & Services
This is an anonymized sample deliverable demonstrating RPP’s ASC 606 Contract Alignment Analysis service. All company names, financials, and contract terms are fictional and for illustrative purposes only. Actual client deliverables are tailored to your specific contracts, industry, and revenue recognition circumstances.
Executive Summary
ASC 606 Compliance Status — Five-Step Assessment
Step 1
Contract Identification
● Compliant
Written contract with enforceable rights confirmed. Commercial substance evident.
Step 2
Performance Obligations
● Compliant
7 distinct POs identified. All pass the distinct-in-context and capable-of-being-distinct tests.
Step 3
Transaction Price
● Action Required
Variable consideration (PO-007 support hours) requires constraint estimate documentation.
Step 4
Allocation
● Compliant
SSP determined for all 7 POs. No discount allocation required. No residual method applied.
Step 5
Revenue Recognition
● Compliant
5 POs recognized over time; 2 POs recognized at a point in time. Timing documented with input method criteria.
Overall Risk
Documentation Gap
● Moderate
Supporting documentation for SSP determinations and variable consideration constraints must be formalized before audit.
Summary for Management and Legal Counsel: This contract is a multi-element arrangement involving hardware engineering, software development, physical manufacturing, installation, and ongoing support services across three Meridian Group Holdings entities. Under ASC 606 (FASB ASC 606-10-05-3), the arrangement requires disaggregation into seven (7) separately identified performance obligations recognized independently based on their nature and transfer timing. Total Year 1 contract value of $826,000 will be recognized across the 12-month contract period, with $380,000 (hardware manufacturing and delivery) deferred until customer acceptance and the balance recognized ratably or as services are performed. One open action item exists: written documentation of the variable consideration constraint estimate for post-installation support hours (PO-007) per ASC 606-10-32-11.
Contract Overview
SmartBuild Automated Quality Control System
| Field | Detail |
|---|---|
| Contract name | SmartBuild Automated Quality Control System — Master Supply & Services Agreement |
| Client (Customer) | BuildCore Solutions, Inc. — Tier 1 commercial building products manufacturer, Indianapolis, IN |
| Vendor (Seller) | Meridian Group Holdings, acting through three operating entities (MEP, MST, MMD) |
| Contract date | January 15, 2025 |
| Contract term | 24 months (through January 14, 2027); software license auto-renews annually thereafter |
| Total Year 1 contract value | $826,000 (fixed + variable; see Step 3 for detail) |
| Payment terms | 30% upfront at signing; milestone payments tied to delivery events; monthly for subscription and support |
| Governing standard | ASC 606, Revenue from Contracts with Customers (FASB, effective January 1, 2018) |
| Contract scope | Design, manufacture, deliver, install, and support an automated quality control sensing and monitoring system for BuildCore’s Indianapolis manufacturing line, including hardware units, real-time software dashboard, and ongoing engineering support |
Entities & Scope
Meridian Group Holdings — Operating Entity Roles
| Entity | Role in Contract | Performance Obligations |
|---|---|---|
| Meridian Engineering & Professional Services (MEP) | Lead engineering — hardware design, installation, onsite support | PO-001, PO-005, PO-006, PO-007 |
| Meridian Software Technologies (MST) | Software development and licensing — SmartBuild Dashboard | PO-002, PO-003 |
| Meridian Manufacturing & Distribution (MMD) | Manufacturing and delivery of physical QC hardware units | PO-004 |
ASC 606 — Step 1 ASC 606-10-25-1
Identify the Contract with a Customer
ASC 606-10-25-1: An entity shall account for a contract with a customer only when all of the following criteria are met: (a) the parties have approved the contract; (b) each party’s rights regarding the goods or services to be transferred can be identified; (c) the payment terms can be identified; (d) the contract has commercial substance; and (e) it is probable that the entity will collect the consideration to which it will be entitled.
| Criterion | Evidence | Assessment |
|---|---|---|
| (a) Contract approved by both parties | Master Supply & Services Agreement executed January 15, 2025, countersigned by BuildCore VP of Operations and MGH Chief Revenue Officer. Available as Exhibit 1. | ✓ Met |
| (b) Rights of each party identified | Statement of Work (Exhibit 2) details deliverables, acceptance criteria, and rights of use for each performance obligation. IP ownership provisions in Section 9 of MGH T&Cs. | ✓ Met |
| (c) Payment terms identified | Section 4 of the agreement specifies: 30% ($247,800) at signing; milestone payments at delivery and UAT; $2,000/month subscription; support billed monthly at $1,500/day. | ✓ Met |
| (d) Commercial substance | Contract involves transfer of specialized engineering, software, and physical goods that materially change BuildCore’s manufacturing capacity. Cash flows affected upon delivery. | ✓ Met |
| (e) Collectability probable | BuildCore credit review completed January 8, 2025: D&B PAYDEX 82, 2 years trade history, $2.1M credit line with bank reference. Credit threshold met per MGH policy. | ✓ Met |
Conclusion — Step 1: All five criteria under ASC 606-10-25-1 are satisfied. The arrangement constitutes a valid contract for ASC 606 purposes. No combination or modification analysis required — this is a single contract with multiple elements.
ASC 606 — Step 2 ASC 606-10-25-14
Identify the Performance Obligations in the Contract
ASC 606-10-25-14: At contract inception, an entity shall assess the goods or services promised in a contract with a customer and shall identify as a performance obligation each promise to transfer to the customer either: (a) a good or service (or a bundle of goods or services) that is distinct; or (b) a series of distinct goods or services that are substantially the same and have the same pattern of transfer.
ASC 606-10-25-19 (Distinct test): A good or service is distinct if: (a) the customer can benefit from the good or service on its own or together with other readily available resources (capable of being distinct); and (b) the entity’s promise to transfer the good or service to the customer is separately identifiable from other promises (distinct within the context of the contract).
Seven performance obligations were identified following analysis of all promises in the contract, including those implicit in customary business practices per ASC 606-10-25-16. Each was evaluated against the two-part distinct test.
PO-001Over Time
Hardware Engineering & Product Design Services
Entity: Meridian Engineering & Professional Services (MEP) | ASC 606-10-25-27(b)
MEP will provide senior mechanical and electrical engineering resources to design the SmartBuild QC sensing hardware — including custom sensor arrays, mounting systems, and integration harnesses. Deliverable: approved engineering drawings, BOM, and design specification package (Exhibit 3). Time-and-materials basis.
$250.00 / hr
580 hrs
$145,000
Input method — hours expended ASC 606-10-55-21
4 months (Feb–May 2025)
✓ Passes — customer could separately engage engineering firm
PO-002Over Time
Software Development — SmartBuild Dashboard
Entity: Meridian Software Technologies (MST) | ASC 606-10-25-27(b)
MST will develop a real-time production monitoring and quality alert dashboard (SmartBuild Dashboard v1.0) — including sensor data ingestion API, web-based UI, automated alert engine, and management reporting module. Customer has no alternative use for the customized software and MST has an enforceable right to payment for work completed per ASC 606-10-25-27(c).
$85,000 (fixed fee)
Input method — costs incurred ASC 606-10-55-21
6 months (Feb–Jul 2025)
Requirements (Month 1), Alpha (Month 3), Beta (Month 5), UAT (Month 6)
None — custom to BuildCore specifications
✓ Passes — software development separable from hardware
PO-003Over Time
Software License — SmartBuild Dashboard (SaaS Subscription)
Entity: Meridian Software Technologies (MST) | ASC 606-10-25-27(a) / ASC 350-40
24-month subscription license providing BuildCore with ongoing access to the SmartBuild Dashboard SaaS platform, including hosting, security patches, feature updates, and standard uptime SLA. Treated as a series of distinct services per ASC 606-10-25-15 — each month of access is substantially the same with the same pattern of transfer (straight-line). Distinct from PO-002 (development) because a license can be acquired independently from development services.
$2,000.00 / month
24 months (Aug 2025–Jul 2027)
$48,000
Straight-line, monthly ASC 606-10-25-14(b)
UAT sign-off and go-live
✓ Passes — MST lists this as a standalone subscription at $2,000/month
PO-004Point in Time
Manufacturing & Delivery of SmartBuild QC Hardware Units
Entity: Meridian Manufacturing & Distribution (MMD) | ASC 606-10-25-30
MMD will manufacture 24 SmartBuild sensor units and 4 master controller assemblies per approved engineering specifications (PO-001). Revenue recognized at the point in time when control transfers to BuildCore — defined in the contract as customer acceptance sign-off at BuildCore’s Indianapolis facility. Five indicators of control transfer per ASC 606-10-25-30 evaluated: (a) MMD has present right to payment upon acceptance ✓; (b) BuildCore has legal title ✓; (c) BuildCore has physical possession ✓; (d) BuildCore has significant risks and rewards ✓; (e) BuildCore has accepted the asset (acceptance criteria in Exhibit 4) ✓.
$380,000 (fixed price)
24 sensor units + 4 controller assemblies
Written customer acceptance (Exhibit 4)
Month 7 (August 2025)
DAP (Delivered at Place) — BuildCore facility
✓ Passes — physical goods deliverable independently
PO-005Over Time
Hardware Installation & Commissioning Services
Entity: Meridian Engineering & Professional Services (MEP) | ASC 606-10-25-27(b)
MEP field engineers will install and commission all 24 SmartBuild sensor units and 4 controller assemblies at BuildCore’s Indianapolis facility. Includes physical mounting, wiring, network integration, sensor calibration, and line test validation. Customer simultaneously receives and consumes the benefit of installation services as MEP performs them — recognized over time per ASC 606-10-25-27(b). Rate schedule applies.
$150.00 / hr (onsite)
450 hrs (3-month installation)
$67,500 (time-and-materials)
Input method — hours expended ASC 606-10-55-21
Months 8–10 (Sep–Nov 2025)
Billed separately at cost — not a performance obligation per ASC 606-10-55-2
PO-006Point in Time
Software Configuration, Integration & Go-Live Services
Entity: Meridian Engineering & Professional Services (MEP) | ASC 606-10-25-30
MEP technology integration team will configure the SmartBuild Dashboard for BuildCore’s production environment, including sensor-to-API mapping, ERP data connector setup, alert threshold calibration, user access provisioning, and go-live support through first production run. Distinct from PO-002 (development) and PO-003 (license) because configuration is a discrete, one-time deliverable with defined acceptance criteria (UAT sign-off — Exhibit 5). Recognized at a point in time upon UAT completion and written acceptance per ASC 606-10-25-30(e).
$28,500 (fixed fee)
UAT sign-off (Exhibit 5)
Month 9 (October 2025)
Dashboard live on BuildCore network, all sensors reporting, first automated alert confirmed
✓ Passes — configuration engagement separate from dev and licensing
ASC 350-40-55-2 — hosting implementation guidance
PO-007Over Time
Post-Installation Onsite Engineering Support
Entity: Meridian Engineering & Professional Services (MEP) | ASC 606-10-25-27(b)
MEP senior engineers will provide on-call and scheduled onsite support at BuildCore’s facility post-commissioning, covering hardware diagnostics, sensor recalibration, line modifications, and production troubleshooting. Services rendered on a time-and-materials basis; customer simultaneously receives and consumes the benefit as services are performed. Variable consideration — estimated hours subject to constraint per ASC 606-10-32-11 (see Step 3 action item).
$1,500.00 / day (onsite, 8-hr day)
48 days over 12 months
$72,000 (variable — subject to constraint)
Constrained input method — days rendered ASC 606-10-55-21
$18,000 (12 guaranteed days/year per Section 5.3 of agreement)
⚠ Written constraint estimate documentation required
Bundling assessment per ASC 606-10-25-21: PO-005 (hardware installation) and PO-006 (software configuration) were evaluated for bundling. Conclusion: not bundled — each delivers standalone value, has separate acceptance criteria, and could be performed by a different vendor. Treated as separate obligations.
ASC 606 — Step 3 ASC 606-10-32-2
Determine the Transaction Price
ASC 606-10-32-2: An entity shall consider the terms of the contract and its customary business practices to determine the transaction price. The transaction price is the amount of consideration to which an entity expects to be entitled in exchange for transferring promised goods or services to a customer, excluding amounts collected on behalf of third parties.
| PO | Description | Consideration Type | Year 1 Value |
|---|---|---|---|
| PO-001 | Hardware Engineering Design | Variable (T&M — capped at 640 hrs) | $145,000 (580 hrs est.) |
| PO-002 | Software Development | Fixed | $85,000 |
| PO-003 | Software License (Year 1 portion) | Fixed (monthly) | $10,000 (5 months Aug–Dec) |
| PO-004 | Hardware Manufacturing & Delivery | Fixed | $380,000 |
| PO-005 | Hardware Installation & Commissioning | Variable (T&M — capped at 500 hrs) | $67,500 (450 hrs est.) |
| PO-006 | Software Configuration & Go-Live | Fixed | $28,500 |
| PO-007 | Post-Install Onsite Support | Variable — constrained estimate | $72,000 (48 days est.) |
| Total Year 1 Transaction Price | $788,000 | ||
⚠ Action Item — Variable Consideration Constraint (PO-007) ASC 606-10-32-11
PO-007 post-installation support hours are variable. Under ASC 606-10-32-11, the transaction price must exclude variable consideration that could result in a significant revenue reversal. RPP has applied the “most likely amount” method (48 days based on prior similar engagements) but a formal constraint estimate memorandum must be prepared and signed by MEP project management and finance. This documentation does not currently exist and must be completed prior to the FY2025 audit.
Financing component assessment per ASC 606-10-32-15: The 30% upfront payment ($247,800 at signing) was evaluated. Conclusion: no significant financing component exists because (a) the upfront payment is a practical expedient (expect to transfer hardware within 12 months — ASC 606-10-32-18(a)), and (b) the timing difference between payment and delivery reflects commercial rationale (protection against default), not a financing arrangement.
Noncash consideration per ASC 606-10-32-21: Not applicable. BuildCore is paying entirely in cash (USD). No goods, services, or equity instruments received as consideration.
Consideration payable to customer per ASC 606-10-32-25: Not applicable. No volume rebates, credits, or payments are owed by MGH to BuildCore under this contract.
ASC 606 — Step 4 ASC 606-10-32-28
Allocate the Transaction Price to Performance Obligations
ASC 606-10-32-28: An entity shall allocate the transaction price to each performance obligation identified in the contract on a relative standalone selling price basis. An entity shall estimate the standalone selling price at contract inception of the distinct good or service underlying each performance obligation.
Standalone selling prices (SSP) were determined for all seven performance obligations as of contract inception (January 15, 2025). Because all SSPs are directly observable or reliably estimable, the relative SSP allocation is equivalent to the contract price — no discount reallocation is required.
| PO | Description | SSP Method | SSP Range | SSP Used | Basis |
|---|---|---|---|---|---|
| PO-001 | Hardware Engineering Design | Adjusted Market Assessment | $200–$275/hr | $250/hr | MEP rate card; comparable market survey (3 independent quotes: $235, $255, $270/hr) |
| PO-002 | Software Development | Expected Cost Plus Margin | $80K–$92K | $85,000 | Estimated loaded cost $68,000 × 1.25 target margin; validated against 4 comparable MST development engagements in 2024 |
| PO-003 | Software License (monthly) | Observable Price | $2,000/mo | $2,000/mo | MST published price list (effective Jan 2025); this rate is consistently charged to all customers with similar subscription scope |
| PO-004 | Hardware Manufacturing & Delivery | Expected Cost Plus Margin | $355K–$410K | $380,000 | MMD BOM cost $285,000 × 1.33 margin; validated against 3 comparable manufacturing runs in trailing 12 months |
| PO-005 | Hardware Installation | Adjusted Market Assessment | $125–$175/hr | $150/hr | MEP field services rate card; market survey confirms $140–$165/hr for comparable Midwest industrial installation |
| PO-006 | Software Configuration & Go-Live | Expected Cost Plus Margin | $26K–$32K | $28,500 | Estimated loaded cost $22,800 × 1.25 margin; comparable MST configuration engagement in 2024 priced at $27,500 |
| PO-007 | Post-Install Onsite Support | Adjusted Market Assessment | $1,200–$1,800/day | $1,500/day | MEP field services day rate; market survey confirms $1,350–$1,650/day for Midwest senior field engineering |
| PO | Description | SSP Used | Contract Price | Discount / Premium | Allocation |
|---|---|---|---|---|---|
| PO-001 | Hardware Engineering Design | $145,000 | $145,000 | None | $145,000 |
| PO-002 | Software Development | $85,000 | $85,000 | None | $85,000 |
| PO-003 | Software License (24 mos) | $48,000 | $48,000 | None | $48,000 |
| PO-004 | Hardware Manufacturing | $380,000 | $380,000 | None | $380,000 |
| PO-005 | Hardware Installation | $67,500 | $67,500 | None | $67,500 |
| PO-006 | Software Configuration | $28,500 | $28,500 | None | $28,500 |
| PO-007 | Post-Install Support (est.) | $72,000 | $72,000 | None | $72,000 |
| Total | $826,000 | $826,000 | None | $826,000 | |
Conclusion — Step 4: No discount exists in this arrangement (total SSP = contract price). Allocation is performed on a 1:1 basis. No residual method applicable per ASC 606-10-32-34 as all SSPs are directly observable or reliably estimable. No contract modifications have occurred as of this analysis date.
ASC 606 — Step 5 ASC 606-10-25-23
Recognize Revenue When (or As) Performance Obligations Are Satisfied
ASC 606-10-25-23: An entity shall recognize revenue when (or as) it satisfies a performance obligation by transferring a promised good or service to a customer. An asset is transferred when (or as) the customer obtains control of that asset.
| PO | Timing | Criteria Satisfied | Method | Recognition Pattern |
|---|---|---|---|---|
| PO-001 | Over time | Customer simultaneously receives and consumes benefits as MEP performs ASC 606-10-25-27(b) | Input — hours expended ASC 606-10-55-21 | Ratably over 4 months (Feb–May 2025): ~$36,250/month |
| PO-002 | Over time | No alternative use; enforceable right to payment for work completed ASC 606-10-25-27(c) | Input — costs incurred ASC 606-10-55-21 | Based on cost incurred vs. total estimated cost over 6 months (Feb–Jul 2025) |
| PO-003 | Over time | Series of distinct monthly services — same pattern of transfer ASC 606-10-25-15 | Straight-line (time elapsed) ASC 606-10-55-18 | $2,000 per month — commencing UAT go-live (Aug 2025) |
| PO-004 | Point in time | All 5 control transfer indicators per ASC 606-10-25-30 satisfied at acceptance (Exhibit 4) | N/A — single recognition event | $380,000 recognized upon written customer acceptance (est. Month 7) |
| PO-005 | Over time | Customer simultaneously receives and consumes as installation progresses ASC 606-10-25-27(b) | Input — hours expended ASC 606-10-55-21 | T&M — billed and recognized as installation hours are recorded; ~3 months (Sep–Nov 2025) |
| PO-006 | Point in time | Control transfers upon UAT sign-off; customer has accepted and can benefit from the configured system ASC 606-10-25-30(e) | N/A — single recognition event | $28,500 recognized upon written UAT acceptance (Exhibit 5, est. Month 9) |
| PO-007 | Over time | Customer simultaneously receives and consumes as support is rendered ASC 606-10-25-27(b) | Input — days rendered (constrained) ASC 606-10-55-21 | T&M — billed and recognized as support days are rendered; constrained at $18,000 guaranteed minimum until variable estimate documented |
Revenue Recognition Schedule — FY 2025 (Jan–Dec)
| Performance Obligation | Feb | Mar | Apr | May | Jun | Jul | Aug | Sep | Oct | Nov | Dec | FY25 Total |
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| PO-001 Hardware Design | $36,250 | $36,250 | $36,250 | $36,250 | — | — | — | — | — | — | — | $145,000 |
| PO-002 Software Dev | $11,667 | $14,167 | $14,167 | $14,167 | $16,666 | $14,166 | — | — | — | — | — | $85,000 |
| PO-003 Sw License | — | — | — | — | — | — | $2,000 | $2,000 | $2,000 | $2,000 | $2,000 | $10,000 |
| PO-004 Manufacturing | — | — | — | — | — | — | $380,000* | — | — | — | — | $380,000 |
| PO-005 Hw Install | — | — | — | — | — | — | — | $22,500 | $22,500 | $22,500 | — | $67,500 |
| PO-006 Sw Config | — | — | — | — | — | — | — | — | $28,500** | — | — | $28,500 |
| PO-007 Support (min) | — | — | — | — | — | — | — | — | — | $4,500 | $4,500 | $9,000 |
| Monthly Total | $47,917 | $50,417 | $50,417 | $50,417 | $16,666 | $14,166 | $382,000 | $24,500 | $53,000 | $28,500 | $6,500 | $724,500 |
* PO-004 recognized upon written BuildCore acceptance of hardware delivery (Exhibit 4). Delivery estimated Month 7; actual timing may vary. ** PO-006 recognized upon UAT sign-off (Exhibit 5). Remaining FY25 total of $724,500 vs. Year 1 contract value of $826,000 due to PO-007 variable constraint ($63,000 deferred to 2026 pending documentation) and PO-003 ($38,000 in Year 2).
Audit Readiness
Required Supporting Documentation Checklist
The following documentation is required to support this ASC 606 analysis in an audit context. Documents should be retained in the contract file for a minimum of 7 years per GAAP standard practice. Documents listed as Not on File must be obtained or created before the FY2025 audit.
| Document | Purpose / ASC Reference | Responsible Party | Status |
|---|---|---|---|
| Executed Master Supply & Services Agreement | Contract existence — ASC 606-10-25-1 | Legal | ✓ On File |
| Statement of Work (Exhibit 2) — all POs defined | Performance obligation identification — ASC 606-10-25-14 | MEP Project Manager | ✓ On File |
| BuildCore credit review and approval memo | Collectability probable — ASC 606-10-25-1(e) | Finance / Credit Team | ✓ On File |
| MEP Rate Card (effective Jan 2025) | SSP support for PO-001, PO-005, PO-007 — ASC 606-10-32-34 | MEP Finance | ✓ On File |
| MST Subscription Price List (effective Jan 2025) | Observable SSP for PO-003 — ASC 606-10-32-32 | MST Finance | ✓ On File |
| MMD Manufacturing Cost Estimate / BOM for PO-004 | SSP support — Expected cost plus margin — ASC 606-10-32-34 | MMD Engineering | ✓ On File |
| Comparable transaction analysis (3+ prior engagements) | SSP validation — adjusted market assessment — ASC 606-10-32-34 | Finance / Revenue Accounting | ✓ On File |
| Variable Consideration Constraint Estimate Memo (PO-007) | Constraint documentation — ASC 606-10-32-11 — expected value or most likely amount methodology | MEP Finance + Controller | ✗ Not on File — Action Required |
| Customer Acceptance Sign-Off (Hardware Delivery — Exhibit 4) | Control transfer trigger for PO-004 — ASC 606-10-25-30 | MEP Project Manager + BuildCore | ▮ Pending — Not Yet Due |
| UAT Sign-Off (Software Go-Live — Exhibit 5) | Control transfer trigger for PO-006 — ASC 606-10-25-30(e) | MST + BuildCore IT | ▮ Pending — Not Yet Due |
| Time & Materials Billing Detail — all T&M POs | Input method basis — hours/days rendered — ASC 606-10-55-21 | MEP / MMD Ops | ▮ Ongoing — monthly submission |
| No Significant Financing Component Memo | 30% upfront payment assessment — ASC 606-10-32-15 | Controller / Accounting | ✗ Not on File — Action Required |
| Contract Modification Log | Modification accounting — ASC 606-10-25-18 | Legal + Finance | ✓ On File (No modifications to date) |
| Revenue Recognition Policy — internal accounting policy document | Accounting policy election disclosures — ASC 606-10-50-1 | Controller / CAO | ✗ Not on File — Action Required |
| Disaggregated Revenue Disclosure Schedule | Footnote disclosure — ASC 606-10-50-5 | Accounting | ✗ Not on File — Required for FY25 close |
Exhibit A
BuildCore Solutions, Inc. — Standard Purchase Terms & Conditions
This exhibit contains a condensed representation of BuildCore Solutions’ standard purchase terms as submitted at contract initiation. Full version available in the contract file. Per Section 18 of the MGH Master Terms (Exhibit B), in the event of any conflict between these terms and MGH’s Standard Terms, MGH’s terms shall govern.
| Section | BuildCore Standard Term |
|---|---|
| 1. Payment | Net 60 days from invoice date. BuildCore reserves the right to withhold payment pending satisfactory delivery and acceptance of goods or services. Late payments subject to 1.0% per month interest after 90 days. |
| 2. Acceptance | BuildCore has 30 business days following delivery to inspect and accept or reject any goods or deliverables. Silence after 30 days does not constitute acceptance. |
| 3. Warranty | Vendor warrants all goods to be free from defects in materials and workmanship for 24 months from acceptance date. Services warranted for 90 days from delivery. |
| 4. Intellectual Property | All work product, software, designs, and deliverables created specifically for BuildCore under this contract shall be the sole and exclusive property of BuildCore Solutions, Inc. |
| 5. Confidentiality | Vendor shall treat all BuildCore proprietary information as confidential for 5 years. No disclosure without prior written consent. |
| 6. Liability Cap | Vendor’s total liability shall not exceed the total amount paid under this purchase order in the 12 months preceding the claim. |
| 7. Termination | BuildCore may terminate this agreement for convenience with 30 days written notice. BuildCore pays for work completed and materials ordered through termination date. |
| 8. Governing Law | Indiana law. Disputes resolved in Marion County, Indiana courts. |
| 9. Change Orders | No changes to scope, price, or timeline are binding unless signed by BuildCore VP of Operations or above. |
| 10. Insurance | Vendor shall maintain commercial general liability insurance of at least $2M per occurrence, $5M aggregate, and name BuildCore as additional insured. |
Exhibit B
Meridian Group Holdings — Master Terms & Conditions
| Section | MGH Standard Term |
|---|---|
| 1. Payment Terms | Net 30 days from invoice date. Invoices are issued per the payment schedule in the SOW. Overdue balances accrue interest at 1.5% per month. MGH reserves the right to suspend services on accounts 45+ days past due without liability. |
| 2. Acceptance | Customer has 10 business days from delivery to provide written acceptance or written rejection with specific deficiency list. Silence after 10 business days constitutes acceptance. Rejection must specify all deficiencies; MGH has 20 business days to cure. |
| 3. Intellectual Property | MGH and its subsidiaries retain all intellectual property rights in all tools, methodologies, frameworks, software platforms, and pre-existing IP incorporated into deliverables. Customer receives a limited, non-exclusive, non-transferable license for the specific deliverable only. Custom work product belongs to Customer only to the extent explicitly stated in the SOW. |
| 4. Warranty | MGH warrants physical goods against defects in materials and workmanship for 12 months from customer acceptance. Software licensed on a SaaS basis is warranted to perform materially as described in the applicable product specification for the duration of the subscription. Professional services are warranted to be performed in a professional and workmanlike manner. Warranties are void if Customer modifies any deliverable without written MGH authorization. |
| 5. Liability Limitation | MGH’s aggregate liability for any and all claims under this agreement shall not exceed the total fees paid by Customer to MGH in the 12-month period immediately preceding the claim. In no event shall MGH be liable for indirect, consequential, incidental, punitive, or special damages, including lost profits, even if advised of the possibility of such damages. |
| 6. Confidentiality | Each party shall maintain the other’s Confidential Information in strict confidence and not disclose it to any third party for 5 years from disclosure. Confidential Information excludes information that is publicly available, rightfully received from a third party, or independently developed. |
| 7. Data Security | MGH employs SOC 2 Type II compliant security controls for all customer data processed through its platforms. Customer data is encrypted at rest (AES-256) and in transit (TLS 1.3). MGH shall notify Customer of any confirmed data breach within 72 hours of discovery. |
| 8. Change Orders | All changes to scope, deliverables, timeline, or price require a written Change Order signed by both parties. Verbal authorizations are not binding. MGH is under no obligation to perform out-of-scope work pending execution of a Change Order. |
| 9. Termination | Either party may terminate for cause upon 30 days written notice if the other party materially breaches and fails to cure within the notice period. Customer may terminate for convenience with 60 days written notice; Customer remains obligated to pay for all work completed, materials procured, and non-cancellable commitments made through termination date. Software subscriptions are non-refundable for the current subscription period. |
| 10. Governing Law & Dispute Resolution | Indiana law governs. Disputes resolved first by senior executive negotiation (30 days), then binding arbitration under JAMS rules in Indianapolis, Indiana. Prevailing party entitled to reasonable attorneys’ fees. |
| 11. Insurance | MGH maintains commercial general liability ($3M per occurrence, $10M aggregate), professional liability / errors & omissions ($5M), and cyber liability ($5M) insurance coverage. |
| 12. Compliance | MGH and Customer each represent that they will comply with all applicable laws, including export control regulations, anti-bribery and anti-corruption laws (FCPA, UK Bribery Act), and data privacy regulations applicable to their respective jurisdictions. |
| 13. Force Majeure | Neither party shall be liable for delays or failures caused by events beyond its reasonable control (acts of God, government actions, pandemics, supply chain disruptions). The affected party shall notify the other within 5 business days and use commercially reasonable efforts to mitigate. |
| 14. Assignment | Neither party may assign this agreement without the other’s prior written consent, except MGH may assign to an affiliate or acquirer without consent. |
| 15. Entire Agreement | This agreement, together with all SOWs and exhibits incorporated herein, constitutes the entire agreement between the parties with respect to its subject matter and supersedes all prior discussions, representations, and understandings. |
Exhibit C
Terms & Conditions Conflict Resolution — Order of Precedence
Section 18 — Order of Precedence and Terms Conflict Resolution
In the event of any inconsistency, conflict, or ambiguity between or among the documents constituting this agreement, the following order of precedence shall govern, with higher-numbered documents taking precedence over lower-numbered documents:
Notwithstanding any conflicting terms in Customer’s purchase order, purchase terms, vendor portal requirements, or standard conditions of purchase, the terms set forth in this agreement and Meridian Group Holdings’ Standard Terms & Conditions (Exhibit B) shall govern. Customer’s issuance of a purchase order or other ordering document referencing this agreement shall be deemed acceptance of these terms and shall not modify, amend, or supersede any term herein, even if MGH does not object to or acknowledge receipt of such purchase order.
Specific Conflicts Identified and Resolved:
In the event of any inconsistency, conflict, or ambiguity between or among the documents constituting this agreement, the following order of precedence shall govern, with higher-numbered documents taking precedence over lower-numbered documents:
- This Master Supply & Services Agreement (body of the agreement)
- Meridian Group Holdings Standard Terms & Conditions (Exhibit B)
- Statement of Work and any signed Change Orders (Exhibit 2 + subsequent Change Orders)
- Customer Purchase Terms & Conditions (Exhibit A — BuildCore Standard Terms)
- Any other attachments, exhibits, or incorporated documents
Notwithstanding any conflicting terms in Customer’s purchase order, purchase terms, vendor portal requirements, or standard conditions of purchase, the terms set forth in this agreement and Meridian Group Holdings’ Standard Terms & Conditions (Exhibit B) shall govern. Customer’s issuance of a purchase order or other ordering document referencing this agreement shall be deemed acceptance of these terms and shall not modify, amend, or supersede any term herein, even if MGH does not object to or acknowledge receipt of such purchase order.
Specific Conflicts Identified and Resolved:
| Subject | BuildCore Term (Exhibit A) | MGH Term (Exhibit B) | Governing Term | Basis |
|---|---|---|---|---|
| Payment terms | Net 60 days | Net 30 days | MGH — Net 30 | Order of precedence §18; Exhibit B §1 governs |
| Acceptance period | 30 business days | 10 business days | MGH — 10 business days | Order of precedence §18; Exhibit B §2 governs |
| IP ownership (custom work) | All custom work product belongs to BuildCore | Limited license; IP retained by MGH unless SOW states otherwise | MGH — per SOW | SOW Exhibit 2, §9 specifies IP ownership by element; Exhibit B §3 governs absent specific SOW language |
| Warranty period (goods) | 24 months from acceptance | 12 months from acceptance | MGH — 12 months | Order of precedence §18; Exhibit B §4 governs |
| Liability cap | 12 months of fees paid | 12 months of fees paid | Consistent — no conflict | N/A |
| Governing law | Indiana / Marion County courts | Indiana / JAMS arbitration | MGH — JAMS arbitration | Order of precedence §18; Exhibit B §10 governs |
| Change order authority | VP of Operations or above | Signed by both parties | MGH — dual party sign-off required | Order of precedence §18; Exhibit B §8 governs |
Legal notice: This conflict resolution schedule was reviewed and agreed upon at contract signing. BuildCore’s countersignature on the Master Supply & Services Agreement constitutes acknowledgment of and agreement to this order of precedence.
Sample Deliverable Notice: This document is an anonymized demonstration of an RPP ASC 606 Contract Alignment Analysis. All company names (Meridian Group Holdings, BuildCore Solutions, Inc.), financial figures, contract terms, and project details are fictional. This document does not constitute legal or accounting advice. Actual RPP deliverables are tailored to your specific contracts, industry, accounting policies, and audit requirements. © Revenue Partner Pros. All rights reserved.
Revenue Partner Pros
Sample Deliverable
ASC 606 / Revenue Recognition
Contract Alignment Analysis
Multi-Element Arrangement — Hardware, Software & Services
This is an anonymized sample deliverable demonstrating RPP’s ASC 606 Contract Alignment Analysis service. All company names, financials, and contract terms are fictional and for illustrative purposes only. Actual client deliverables are tailored to your specific contracts, industry, and revenue recognition circumstances.
Executive Summary
ASC 606 Compliance Status — Five-Step Assessment
Step 1
Contract Identification
● Compliant
Written contract with enforceable rights confirmed. Commercial substance evident.
Step 2
Performance Obligations
● Compliant
7 distinct POs identified. All pass the distinct-in-context and capable-of-being-distinct tests.
Step 3
Transaction Price
● Action Required
Variable consideration (PO-007 support hours) requires constraint estimate documentation.
Step 4
Allocation
● Compliant
SSP determined for all 7 POs. No discount allocation required. No residual method applied.
Step 5
Revenue Recognition
● Compliant
5 POs recognized over time; 2 POs recognized at a point in time. Timing documented with input method criteria.
Overall Risk
Documentation Gap
● Moderate
Supporting documentation for SSP determinations and variable consideration constraints must be formalized before audit.
Summary for Management and Legal Counsel: This contract is a multi-element arrangement involving hardware engineering, software development, physical manufacturing, installation, and ongoing support services across three Meridian Group Holdings entities. Under ASC 606 (FASB ASC 606-10-05-3), the arrangement requires disaggregation into seven (7) separately identified performance obligations recognized independently based on their nature and transfer timing. Total Year 1 contract value of $826,000 will be recognized across the 12-month contract period, with $380,000 (hardware manufacturing and delivery) deferred until customer acceptance and the balance recognized ratably or as services are performed. One open action item exists: written documentation of the variable consideration constraint estimate for post-installation support hours (PO-007) per ASC 606-10-32-11.
Contract Overview
SmartBuild Automated Quality Control System
| Field | Detail |
|---|---|
| Contract name | SmartBuild Automated Quality Control System — Master Supply & Services Agreement |
| Client (Customer) | BuildCore Solutions, Inc. — Tier 1 commercial building products manufacturer, Indianapolis, IN |
| Vendor (Seller) | Meridian Group Holdings, acting through three operating entities (MEP, MST, MMD) |
| Contract date | January 15, 2025 |
| Contract term | 24 months (through January 14, 2027); software license auto-renews annually thereafter |
| Total Year 1 contract value | $826,000 (fixed + variable; see Step 3 for detail) |
| Payment terms | 30% upfront at signing; milestone payments tied to delivery events; monthly for subscription and support |
| Governing standard | ASC 606, Revenue from Contracts with Customers (FASB, effective January 1, 2018) |
| Contract scope | Design, manufacture, deliver, install, and support an automated quality control sensing and monitoring system for BuildCore’s Indianapolis manufacturing line, including hardware units, real-time software dashboard, and ongoing engineering support |
Entities & Scope
Meridian Group Holdings — Operating Entity Roles
| Entity | Role in Contract | Performance Obligations |
|---|---|---|
| Meridian Engineering & Professional Services (MEP) | Lead engineering — hardware design, installation, onsite support | PO-001, PO-005, PO-006, PO-007 |
| Meridian Software Technologies (MST) | Software development and licensing — SmartBuild Dashboard | PO-002, PO-003 |
| Meridian Manufacturing & Distribution (MMD) | Manufacturing and delivery of physical QC hardware units | PO-004 |
ASC 606 — Step 1 ASC 606-10-25-1
Identify the Contract with a Customer
ASC 606-10-25-1: An entity shall account for a contract with a customer only when all of the following criteria are met: (a) the parties have approved the contract; (b) each party’s rights regarding the goods or services to be transferred can be identified; (c) the payment terms can be identified; (d) the contract has commercial substance; and (e) it is probable that the entity will collect the consideration to which it will be entitled.
| Criterion | Evidence | Assessment |
|---|---|---|
| (a) Contract approved by both parties | Master Supply & Services Agreement executed January 15, 2025, countersigned by BuildCore VP of Operations and MGH Chief Revenue Officer. Available as Exhibit 1. | ✓ Met |
| (b) Rights of each party identified | Statement of Work (Exhibit 2) details deliverables, acceptance criteria, and rights of use for each performance obligation. IP ownership provisions in Section 9 of MGH T&Cs. | ✓ Met |
| (c) Payment terms identified | Section 4 of the agreement specifies: 30% ($247,800) at signing; milestone payments at delivery and UAT; $2,000/month subscription; support billed monthly at $1,500/day. | ✓ Met |
| (d) Commercial substance | Contract involves transfer of specialized engineering, software, and physical goods that materially change BuildCore’s manufacturing capacity. Cash flows affected upon delivery. | ✓ Met |
| (e) Collectability probable | BuildCore credit review completed January 8, 2025: D&B PAYDEX 82, 2 years trade history, $2.1M credit line with bank reference. Credit threshold met per MGH policy. | ✓ Met |
Conclusion — Step 1: All five criteria under ASC 606-10-25-1 are satisfied. The arrangement constitutes a valid contract for ASC 606 purposes. No combination or modification analysis required — this is a single contract with multiple elements.
ASC 606 — Step 2 ASC 606-10-25-14
Identify the Performance Obligations in the Contract
ASC 606-10-25-14: At contract inception, an entity shall assess the goods or services promised in a contract with a customer and shall identify as a performance obligation each promise to transfer to the customer either: (a) a good or service (or a bundle of goods or services) that is distinct; or (b) a series of distinct goods or services that are substantially the same and have the same pattern of transfer.
ASC 606-10-25-19 (Distinct test): A good or service is distinct if: (a) the customer can benefit from the good or service on its own or together with other readily available resources (capable of being distinct); and (b) the entity’s promise to transfer the good or service to the customer is separately identifiable from other promises (distinct within the context of the contract).
Seven performance obligations were identified following analysis of all promises in the contract, including those implicit in customary business practices per ASC 606-10-25-16. Each was evaluated against the two-part distinct test.
PO-001Over Time
Hardware Engineering & Product Design Services
Entity: Meridian Engineering & Professional Services (MEP) | ASC 606-10-25-27(b)
MEP will provide senior mechanical and electrical engineering resources to design the SmartBuild QC sensing hardware — including custom sensor arrays, mounting systems, and integration harnesses. Deliverable: approved engineering drawings, BOM, and design specification package (Exhibit 3). Time-and-materials basis.
$250.00 / hr
580 hrs
$145,000
Input method — hours expended ASC 606-10-55-21
4 months (Feb–May 2025)
✓ Passes — customer could separately engage engineering firm
PO-002Over Time
Software Development — SmartBuild Dashboard
Entity: Meridian Software Technologies (MST) | ASC 606-10-25-27(b)
MST will develop a real-time production monitoring and quality alert dashboard (SmartBuild Dashboard v1.0) — including sensor data ingestion API, web-based UI, automated alert engine, and management reporting module. Customer has no alternative use for the customized software and MST has an enforceable right to payment for work completed per ASC 606-10-25-27(c).
$85,000 (fixed fee)
Input method — costs incurred ASC 606-10-55-21
6 months (Feb–Jul 2025)
Requirements (Month 1), Alpha (Month 3), Beta (Month 5), UAT (Month 6)
None — custom to BuildCore specifications
✓ Passes — software development separable from hardware
PO-003Over Time
Software License — SmartBuild Dashboard (SaaS Subscription)
Entity: Meridian Software Technologies (MST) | ASC 606-10-25-27(a) / ASC 350-40
24-month subscription license providing BuildCore with ongoing access to the SmartBuild Dashboard SaaS platform, including hosting, security patches, feature updates, and standard uptime SLA. Treated as a series of distinct services per ASC 606-10-25-15 — each month of access is substantially the same with the same pattern of transfer (straight-line). Distinct from PO-002 (development) because a license can be acquired independently from development services.
$2,000.00 / month
24 months (Aug 2025–Jul 2027)
$48,000
Straight-line, monthly ASC 606-10-25-14(b)
UAT sign-off and go-live
✓ Passes — MST lists this as a standalone subscription at $2,000/month
PO-004Point in Time
Manufacturing & Delivery of SmartBuild QC Hardware Units
Entity: Meridian Manufacturing & Distribution (MMD) | ASC 606-10-25-30
MMD will manufacture 24 SmartBuild sensor units and 4 master controller assemblies per approved engineering specifications (PO-001). Revenue recognized at the point in time when control transfers to BuildCore — defined in the contract as customer acceptance sign-off at BuildCore’s Indianapolis facility. Five indicators of control transfer per ASC 606-10-25-30 evaluated: (a) MMD has present right to payment upon acceptance ✓; (b) BuildCore has legal title ✓; (c) BuildCore has physical possession ✓; (d) BuildCore has significant risks and rewards ✓; (e) BuildCore has accepted the asset (acceptance criteria in Exhibit 4) ✓.
$380,000 (fixed price)
24 sensor units + 4 controller assemblies
Written customer acceptance (Exhibit 4)
Month 7 (August 2025)
DAP (Delivered at Place) — BuildCore facility
✓ Passes — physical goods deliverable independently
PO-005Over Time
Hardware Installation & Commissioning Services
Entity: Meridian Engineering & Professional Services (MEP) | ASC 606-10-25-27(b)
MEP field engineers will install and commission all 24 SmartBuild sensor units and 4 controller assemblies at BuildCore’s Indianapolis facility. Includes physical mounting, wiring, network integration, sensor calibration, and line test validation. Customer simultaneously receives and consumes the benefit of installation services as MEP performs them — recognized over time per ASC 606-10-25-27(b). Rate schedule applies.
$150.00 / hr (onsite)
450 hrs (3-month installation)
$67,500 (time-and-materials)
Input method — hours expended ASC 606-10-55-21
Months 8–10 (Sep–Nov 2025)
Billed separately at cost — not a performance obligation per ASC 606-10-55-2
PO-006Point in Time
Software Configuration, Integration & Go-Live Services
Entity: Meridian Engineering & Professional Services (MEP) | ASC 606-10-25-30
MEP technology integration team will configure the SmartBuild Dashboard for BuildCore’s production environment, including sensor-to-API mapping, ERP data connector setup, alert threshold calibration, user access provisioning, and go-live support through first production run. Distinct from PO-002 (development) and PO-003 (license) because configuration is a discrete, one-time deliverable with defined acceptance criteria (UAT sign-off — Exhibit 5). Recognized at a point in time upon UAT completion and written acceptance per ASC 606-10-25-30(e).
$28,500 (fixed fee)
UAT sign-off (Exhibit 5)
Month 9 (October 2025)
Dashboard live on BuildCore network, all sensors reporting, first automated alert confirmed
✓ Passes — configuration engagement separate from dev and licensing
ASC 350-40-55-2 — hosting implementation guidance
PO-007Over Time
Post-Installation Onsite Engineering Support
Entity: Meridian Engineering & Professional Services (MEP) | ASC 606-10-25-27(b)
MEP senior engineers will provide on-call and scheduled onsite support at BuildCore’s facility post-commissioning, covering hardware diagnostics, sensor recalibration, line modifications, and production troubleshooting. Services rendered on a time-and-materials basis; customer simultaneously receives and consumes the benefit as services are performed. Variable consideration — estimated hours subject to constraint per ASC 606-10-32-11 (see Step 3 action item).
$1,500.00 / day (onsite, 8-hr day)
48 days over 12 months
$72,000 (variable — subject to constraint)
Constrained input method — days rendered ASC 606-10-55-21
$18,000 (12 guaranteed days/year per Section 5.3 of agreement)
⚠ Written constraint estimate documentation required
Bundling assessment per ASC 606-10-25-21: PO-005 (hardware installation) and PO-006 (software configuration) were evaluated for bundling. Conclusion: not bundled — each delivers standalone value, has separate acceptance criteria, and could be performed by a different vendor. Treated as separate obligations.
ASC 606 — Step 3 ASC 606-10-32-2
Determine the Transaction Price
ASC 606-10-32-2: An entity shall consider the terms of the contract and its customary business practices to determine the transaction price. The transaction price is the amount of consideration to which an entity expects to be entitled in exchange for transferring promised goods or services to a customer, excluding amounts collected on behalf of third parties.
| PO | Description | Consideration Type | Year 1 Value |
|---|---|---|---|
| PO-001 | Hardware Engineering Design | Variable (T&M — capped at 640 hrs) | $145,000 (580 hrs est.) |
| PO-002 | Software Development | Fixed | $85,000 |
| PO-003 | Software License (Year 1 portion) | Fixed (monthly) | $10,000 (5 months Aug–Dec) |
| PO-004 | Hardware Manufacturing & Delivery | Fixed | $380,000 |
| PO-005 | Hardware Installation & Commissioning | Variable (T&M — capped at 500 hrs) | $67,500 (450 hrs est.) |
| PO-006 | Software Configuration & Go-Live | Fixed | $28,500 |
| PO-007 | Post-Install Onsite Support | Variable — constrained estimate | $72,000 (48 days est.) |
| Total Year 1 Transaction Price | $788,000 | ||
⚠ Action Item — Variable Consideration Constraint (PO-007) ASC 606-10-32-11
PO-007 post-installation support hours are variable. Under ASC 606-10-32-11, the transaction price must exclude variable consideration that could result in a significant revenue reversal. RPP has applied the “most likely amount” method (48 days based on prior similar engagements) but a formal constraint estimate memorandum must be prepared and signed by MEP project management and finance. This documentation does not currently exist and must be completed prior to the FY2025 audit.
Financing component assessment per ASC 606-10-32-15: The 30% upfront payment ($247,800 at signing) was evaluated. Conclusion: no significant financing component exists because (a) the upfront payment is a practical expedient (expect to transfer hardware within 12 months — ASC 606-10-32-18(a)), and (b) the timing difference between payment and delivery reflects commercial rationale (protection against default), not a financing arrangement.
Noncash consideration per ASC 606-10-32-21: Not applicable. BuildCore is paying entirely in cash (USD). No goods, services, or equity instruments received as consideration.
Consideration payable to customer per ASC 606-10-32-25: Not applicable. No volume rebates, credits, or payments are owed by MGH to BuildCore under this contract.
ASC 606 — Step 4 ASC 606-10-32-28
Allocate the Transaction Price to Performance Obligations
ASC 606-10-32-28: An entity shall allocate the transaction price to each performance obligation identified in the contract on a relative standalone selling price basis. An entity shall estimate the standalone selling price at contract inception of the distinct good or service underlying each performance obligation.
Standalone selling prices (SSP) were determined for all seven performance obligations as of contract inception (January 15, 2025). Because all SSPs are directly observable or reliably estimable, the relative SSP allocation is equivalent to the contract price — no discount reallocation is required.
| PO | Description | SSP Method | SSP Range | SSP Used | Basis |
|---|---|---|---|---|---|
| PO-001 | Hardware Engineering Design | Adjusted Market Assessment | $200–$275/hr | $250/hr | MEP rate card; comparable market survey (3 independent quotes: $235, $255, $270/hr) |
| PO-002 | Software Development | Expected Cost Plus Margin | $80K–$92K | $85,000 | Estimated loaded cost $68,000 × 1.25 target margin; validated against 4 comparable MST development engagements in 2024 |
| PO-003 | Software License (monthly) | Observable Price | $2,000/mo | $2,000/mo | MST published price list (effective Jan 2025); this rate is consistently charged to all customers with similar subscription scope |
| PO-004 | Hardware Manufacturing & Delivery | Expected Cost Plus Margin | $355K–$410K | $380,000 | MMD BOM cost $285,000 × 1.33 margin; validated against 3 comparable manufacturing runs in trailing 12 months |
| PO-005 | Hardware Installation | Adjusted Market Assessment | $125–$175/hr | $150/hr | MEP field services rate card; market survey confirms $140–$165/hr for comparable Midwest industrial installation |
| PO-006 | Software Configuration & Go-Live | Expected Cost Plus Margin | $26K–$32K | $28,500 | Estimated loaded cost $22,800 × 1.25 margin; comparable MST configuration engagement in 2024 priced at $27,500 |
| PO-007 | Post-Install Onsite Support | Adjusted Market Assessment | $1,200–$1,800/day | $1,500/day | MEP field services day rate; market survey confirms $1,350–$1,650/day for Midwest senior field engineering |
| PO | Description | SSP Used | Contract Price | Discount / Premium | Allocation |
|---|---|---|---|---|---|
| PO-001 | Hardware Engineering Design | $145,000 | $145,000 | None | $145,000 |
| PO-002 | Software Development | $85,000 | $85,000 | None | $85,000 |
| PO-003 | Software License (24 mos) | $48,000 | $48,000 | None | $48,000 |
| PO-004 | Hardware Manufacturing | $380,000 | $380,000 | None | $380,000 |
| PO-005 | Hardware Installation | $67,500 | $67,500 | None | $67,500 |
| PO-006 | Software Configuration | $28,500 | $28,500 | None | $28,500 |
| PO-007 | Post-Install Support (est.) | $72,000 | $72,000 | None | $72,000 |
| Total | $826,000 | $826,000 | None | $826,000 | |
Conclusion — Step 4: No discount exists in this arrangement (total SSP = contract price). Allocation is performed on a 1:1 basis. No residual method applicable per ASC 606-10-32-34 as all SSPs are directly observable or reliably estimable. No contract modifications have occurred as of this analysis date.
ASC 606 — Step 5 ASC 606-10-25-23
Recognize Revenue When (or As) Performance Obligations Are Satisfied
ASC 606-10-25-23: An entity shall recognize revenue when (or as) it satisfies a performance obligation by transferring a promised good or service to a customer. An asset is transferred when (or as) the customer obtains control of that asset.
| PO | Timing | Criteria Satisfied | Method | Recognition Pattern |
|---|---|---|---|---|
| PO-001 | Over time | Customer simultaneously receives and consumes benefits as MEP performs ASC 606-10-25-27(b) | Input — hours expended ASC 606-10-55-21 | Ratably over 4 months (Feb–May 2025): ~$36,250/month |
| PO-002 | Over time | No alternative use; enforceable right to payment for work completed ASC 606-10-25-27(c) | Input — costs incurred ASC 606-10-55-21 | Based on cost incurred vs. total estimated cost over 6 months (Feb–Jul 2025) |
| PO-003 | Over time | Series of distinct monthly services — same pattern of transfer ASC 606-10-25-15 | Straight-line (time elapsed) ASC 606-10-55-18 | $2,000 per month — commencing UAT go-live (Aug 2025) |
| PO-004 | Point in time | All 5 control transfer indicators per ASC 606-10-25-30 satisfied at acceptance (Exhibit 4) | N/A — single recognition event | $380,000 recognized upon written customer acceptance (est. Month 7) |
| PO-005 | Over time | Customer simultaneously receives and consumes as installation progresses ASC 606-10-25-27(b) | Input — hours expended ASC 606-10-55-21 | T&M — billed and recognized as installation hours are recorded; ~3 months (Sep–Nov 2025) |
| PO-006 | Point in time | Control transfers upon UAT sign-off; customer has accepted and can benefit from the configured system ASC 606-10-25-30(e) | N/A — single recognition event | $28,500 recognized upon written UAT acceptance (Exhibit 5, est. Month 9) |
| PO-007 | Over time | Customer simultaneously receives and consumes as support is rendered ASC 606-10-25-27(b) | Input — days rendered (constrained) ASC 606-10-55-21 | T&M — billed and recognized as support days are rendered; constrained at $18,000 guaranteed minimum until variable estimate documented |
Revenue Recognition Schedule — FY 2025 (Jan–Dec)
| Performance Obligation | Feb | Mar | Apr | May | Jun | Jul | Aug | Sep | Oct | Nov | Dec | FY25 Total |
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| PO-001 Hardware Design | $36,250 | $36,250 | $36,250 | $36,250 | — | — | — | — | — | — | — | $145,000 |
| PO-002 Software Dev | $11,667 | $14,167 | $14,167 | $14,167 | $16,666 | $14,166 | — | — | — | — | — | $85,000 |
| PO-003 Sw License | — | — | — | — | — | — | $2,000 | $2,000 | $2,000 | $2,000 | $2,000 | $10,000 |
| PO-004 Manufacturing | — | — | — | — | — | — | $380,000* | — | — | — | — | $380,000 |
| PO-005 Hw Install | — | — | — | — | — | — | — | $22,500 | $22,500 | $22,500 | — | $67,500 |
| PO-006 Sw Config | — | — | — | — | — | — | — | — | $28,500** | — | — | $28,500 |
| PO-007 Support (min) | — | — | — | — | — | — | — | — | — | $4,500 | $4,500 | $9,000 |
| Monthly Total | $47,917 | $50,417 | $50,417 | $50,417 | $16,666 | $14,166 | $382,000 | $24,500 | $53,000 | $28,500 | $6,500 | $724,500 |
* PO-004 recognized upon written BuildCore acceptance of hardware delivery (Exhibit 4). Delivery estimated Month 7; actual timing may vary. ** PO-006 recognized upon UAT sign-off (Exhibit 5). Remaining FY25 total of $724,500 vs. Year 1 contract value of $826,000 due to PO-007 variable constraint ($63,000 deferred to 2026 pending documentation) and PO-003 ($38,000 in Year 2).
Audit Readiness
Required Supporting Documentation Checklist
The following documentation is required to support this ASC 606 analysis in an audit context. Documents should be retained in the contract file for a minimum of 7 years per GAAP standard practice. Documents listed as Not on File must be obtained or created before the FY2025 audit.
| Document | Purpose / ASC Reference | Responsible Party | Status |
|---|---|---|---|
| Executed Master Supply & Services Agreement | Contract existence — ASC 606-10-25-1 | Legal | ✓ On File |
| Statement of Work (Exhibit 2) — all POs defined | Performance obligation identification — ASC 606-10-25-14 | MEP Project Manager | ✓ On File |
| BuildCore credit review and approval memo | Collectability probable — ASC 606-10-25-1(e) | Finance / Credit Team | ✓ On File |
| MEP Rate Card (effective Jan 2025) | SSP support for PO-001, PO-005, PO-007 — ASC 606-10-32-34 | MEP Finance | ✓ On File |
| MST Subscription Price List (effective Jan 2025) | Observable SSP for PO-003 — ASC 606-10-32-32 | MST Finance | ✓ On File |
| MMD Manufacturing Cost Estimate / BOM for PO-004 | SSP support — Expected cost plus margin — ASC 606-10-32-34 | MMD Engineering | ✓ On File |
| Comparable transaction analysis (3+ prior engagements) | SSP validation — adjusted market assessment — ASC 606-10-32-34 | Finance / Revenue Accounting | ✓ On File |
| Variable Consideration Constraint Estimate Memo (PO-007) | Constraint documentation — ASC 606-10-32-11 — expected value or most likely amount methodology | MEP Finance + Controller | ✗ Not on File — Action Required |
| Customer Acceptance Sign-Off (Hardware Delivery — Exhibit 4) | Control transfer trigger for PO-004 — ASC 606-10-25-30 | MEP Project Manager + BuildCore | ▮ Pending — Not Yet Due |
| UAT Sign-Off (Software Go-Live — Exhibit 5) | Control transfer trigger for PO-006 — ASC 606-10-25-30(e) | MST + BuildCore IT | ▮ Pending — Not Yet Due |
| Time & Materials Billing Detail — all T&M POs | Input method basis — hours/days rendered — ASC 606-10-55-21 | MEP / MMD Ops | ▮ Ongoing — monthly submission |
| No Significant Financing Component Memo | 30% upfront payment assessment — ASC 606-10-32-15 | Controller / Accounting | ✗ Not on File — Action Required |
| Contract Modification Log | Modification accounting — ASC 606-10-25-18 | Legal + Finance | ✓ On File (No modifications to date) |
| Revenue Recognition Policy — internal accounting policy document | Accounting policy election disclosures — ASC 606-10-50-1 | Controller / CAO | ✗ Not on File — Action Required |
| Disaggregated Revenue Disclosure Schedule | Footnote disclosure — ASC 606-10-50-5 | Accounting | ✗ Not on File — Required for FY25 close |
Exhibit A
BuildCore Solutions, Inc. — Standard Purchase Terms & Conditions
This exhibit contains a condensed representation of BuildCore Solutions’ standard purchase terms as submitted at contract initiation. Full version available in the contract file. Per Section 18 of the MGH Master Terms (Exhibit B), in the event of any conflict between these terms and MGH’s Standard Terms, MGH’s terms shall govern.
| Section | BuildCore Standard Term |
|---|---|
| 1. Payment | Net 60 days from invoice date. BuildCore reserves the right to withhold payment pending satisfactory delivery and acceptance of goods or services. Late payments subject to 1.0% per month interest after 90 days. |
| 2. Acceptance | BuildCore has 30 business days following delivery to inspect and accept or reject any goods or deliverables. Silence after 30 days does not constitute acceptance. |
| 3. Warranty | Vendor warrants all goods to be free from defects in materials and workmanship for 24 months from acceptance date. Services warranted for 90 days from delivery. |
| 4. Intellectual Property | All work product, software, designs, and deliverables created specifically for BuildCore under this contract shall be the sole and exclusive property of BuildCore Solutions, Inc. |
| 5. Confidentiality | Vendor shall treat all BuildCore proprietary information as confidential for 5 years. No disclosure without prior written consent. |
| 6. Liability Cap | Vendor’s total liability shall not exceed the total amount paid under this purchase order in the 12 months preceding the claim. |
| 7. Termination | BuildCore may terminate this agreement for convenience with 30 days written notice. BuildCore pays for work completed and materials ordered through termination date. |
| 8. Governing Law | Indiana law. Disputes resolved in Marion County, Indiana courts. |
| 9. Change Orders | No changes to scope, price, or timeline are binding unless signed by BuildCore VP of Operations or above. |
| 10. Insurance | Vendor shall maintain commercial general liability insurance of at least $2M per occurrence, $5M aggregate, and name BuildCore as additional insured. |
Exhibit B
Meridian Group Holdings — Master Terms & Conditions
| Section | MGH Standard Term |
|---|---|
| 1. Payment Terms | Net 30 days from invoice date. Invoices are issued per the payment schedule in the SOW. Overdue balances accrue interest at 1.5% per month. MGH reserves the right to suspend services on accounts 45+ days past due without liability. |
| 2. Acceptance | Customer has 10 business days from delivery to provide written acceptance or written rejection with specific deficiency list. Silence after 10 business days constitutes acceptance. Rejection must specify all deficiencies; MGH has 20 business days to cure. |
| 3. Intellectual Property | MGH and its subsidiaries retain all intellectual property rights in all tools, methodologies, frameworks, software platforms, and pre-existing IP incorporated into deliverables. Customer receives a limited, non-exclusive, non-transferable license for the specific deliverable only. Custom work product belongs to Customer only to the extent explicitly stated in the SOW. |
| 4. Warranty | MGH warrants physical goods against defects in materials and workmanship for 12 months from customer acceptance. Software licensed on a SaaS basis is warranted to perform materially as described in the applicable product specification for the duration of the subscription. Professional services are warranted to be performed in a professional and workmanlike manner. Warranties are void if Customer modifies any deliverable without written MGH authorization. |
| 5. Liability Limitation | MGH’s aggregate liability for any and all claims under this agreement shall not exceed the total fees paid by Customer to MGH in the 12-month period immediately preceding the claim. In no event shall MGH be liable for indirect, consequential, incidental, punitive, or special damages, including lost profits, even if advised of the possibility of such damages. |
| 6. Confidentiality | Each party shall maintain the other’s Confidential Information in strict confidence and not disclose it to any third party for 5 years from disclosure. Confidential Information excludes information that is publicly available, rightfully received from a third party, or independently developed. |
| 7. Data Security | MGH employs SOC 2 Type II compliant security controls for all customer data processed through its platforms. Customer data is encrypted at rest (AES-256) and in transit (TLS 1.3). MGH shall notify Customer of any confirmed data breach within 72 hours of discovery. |
| 8. Change Orders | All changes to scope, deliverables, timeline, or price require a written Change Order signed by both parties. Verbal authorizations are not binding. MGH is under no obligation to perform out-of-scope work pending execution of a Change Order. |
| 9. Termination | Either party may terminate for cause upon 30 days written notice if the other party materially breaches and fails to cure within the notice period. Customer may terminate for convenience with 60 days written notice; Customer remains obligated to pay for all work completed, materials procured, and non-cancellable commitments made through termination date. Software subscriptions are non-refundable for the current subscription period. |
| 10. Governing Law & Dispute Resolution | Indiana law governs. Disputes resolved first by senior executive negotiation (30 days), then binding arbitration under JAMS rules in Indianapolis, Indiana. Prevailing party entitled to reasonable attorneys’ fees. |
| 11. Insurance | MGH maintains commercial general liability ($3M per occurrence, $10M aggregate), professional liability / errors & omissions ($5M), and cyber liability ($5M) insurance coverage. |
| 12. Compliance | MGH and Customer each represent that they will comply with all applicable laws, including export control regulations, anti-bribery and anti-corruption laws (FCPA, UK Bribery Act), and data privacy regulations applicable to their respective jurisdictions. |
| 13. Force Majeure | Neither party shall be liable for delays or failures caused by events beyond its reasonable control (acts of God, government actions, pandemics, supply chain disruptions). The affected party shall notify the other within 5 business days and use commercially reasonable efforts to mitigate. |
| 14. Assignment | Neither party may assign this agreement without the other’s prior written consent, except MGH may assign to an affiliate or acquirer without consent. |
| 15. Entire Agreement | This agreement, together with all SOWs and exhibits incorporated herein, constitutes the entire agreement between the parties with respect to its subject matter and supersedes all prior discussions, representations, and understandings. |
Exhibit C
Terms & Conditions Conflict Resolution — Order of Precedence
Section 18 — Order of Precedence and Terms Conflict Resolution
In the event of any inconsistency, conflict, or ambiguity between or among the documents constituting this agreement, the following order of precedence shall govern, with higher-numbered documents taking precedence over lower-numbered documents:
Notwithstanding any conflicting terms in Customer’s purchase order, purchase terms, vendor portal requirements, or standard conditions of purchase, the terms set forth in this agreement and Meridian Group Holdings’ Standard Terms & Conditions (Exhibit B) shall govern. Customer’s issuance of a purchase order or other ordering document referencing this agreement shall be deemed acceptance of these terms and shall not modify, amend, or supersede any term herein, even if MGH does not object to or acknowledge receipt of such purchase order.
Specific Conflicts Identified and Resolved:
In the event of any inconsistency, conflict, or ambiguity between or among the documents constituting this agreement, the following order of precedence shall govern, with higher-numbered documents taking precedence over lower-numbered documents:
- This Master Supply & Services Agreement (body of the agreement)
- Meridian Group Holdings Standard Terms & Conditions (Exhibit B)
- Statement of Work and any signed Change Orders (Exhibit 2 + subsequent Change Orders)
- Customer Purchase Terms & Conditions (Exhibit A — BuildCore Standard Terms)
- Any other attachments, exhibits, or incorporated documents
Notwithstanding any conflicting terms in Customer’s purchase order, purchase terms, vendor portal requirements, or standard conditions of purchase, the terms set forth in this agreement and Meridian Group Holdings’ Standard Terms & Conditions (Exhibit B) shall govern. Customer’s issuance of a purchase order or other ordering document referencing this agreement shall be deemed acceptance of these terms and shall not modify, amend, or supersede any term herein, even if MGH does not object to or acknowledge receipt of such purchase order.
Specific Conflicts Identified and Resolved:
| Subject | BuildCore Term (Exhibit A) | MGH Term (Exhibit B) | Governing Term | Basis |
|---|---|---|---|---|
| Payment terms | Net 60 days | Net 30 days | MGH — Net 30 | Order of precedence §18; Exhibit B §1 governs |
| Acceptance period | 30 business days | 10 business days | MGH — 10 business days | Order of precedence §18; Exhibit B §2 governs |
| IP ownership (custom work) | All custom work product belongs to BuildCore | Limited license; IP retained by MGH unless SOW states otherwise | MGH — per SOW | SOW Exhibit 2, §9 specifies IP ownership by element; Exhibit B §3 governs absent specific SOW language |
| Warranty period (goods) | 24 months from acceptance | 12 months from acceptance | MGH — 12 months | Order of precedence §18; Exhibit B §4 governs |
| Liability cap | 12 months of fees paid | 12 months of fees paid | Consistent — no conflict | N/A |
| Governing law | Indiana / Marion County courts | Indiana / JAMS arbitration | MGH — JAMS arbitration | Order of precedence §18; Exhibit B §10 governs |
| Change order authority | VP of Operations or above | Signed by both parties | MGH — dual party sign-off required | Order of precedence §18; Exhibit B §8 governs |
Legal notice: This conflict resolution schedule was reviewed and agreed upon at contract signing. BuildCore’s countersignature on the Master Supply & Services Agreement constitutes acknowledgment of and agreement to this order of precedence.
Sample Deliverable Notice: This document is an anonymized demonstration of an RPP ASC 606 Contract Alignment Analysis. All company names (Meridian Group Holdings, BuildCore Solutions, Inc.), financial figures, contract terms, and project details are fictional. This document does not constitute legal or accounting advice. Actual RPP deliverables are tailored to your specific contracts, industry, accounting policies, and audit requirements. © Revenue Partner Pros. All rights reserved.