Quillon
Review the rev rec memo and check against ASC 606
Researching 3 queries
ASC 606-10-25-21 performance obligation identification
ASC 606-10-25-27 distinct goods or services criteria
Contract modification standalone selling price allocation
Analyzing contract
CloudScale MSA — Jan 2026
36-month SaaS · $42.3M TCV
2 performance obligations identified
ASC 606 · Revenue ASC 606 · Obligations ASC 606 · Modifications
Obligation count
a single obligation→two distinct obligations
§ ASC 606-10-25-21
Recognition method
ratably over 36 months→per the input method
§ ASC 606-10-25-27
Liability figure
$12.4M→$14.1M
§ ASC 606-10-32-11
Done — 3 changes applied.
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Revenue Recognition Memo
TO:
Audit Committee
FROM:
Technical Accounting
RE:
ASC 606 — CloudScale SaaS
DATE:
March 2026
Issue

Whether the CloudScale SaaS arrangement contains a single combined obligation or multiple distinct obligations under ASC 606.

Analysis

The arrangement contains a single obligation two distinct obligations under ASC 606-10-25-21. Implementation services are capable of being distinct from the subscription.

Subscription revenue should be recognized ratably over 36 months per the input method, consistent with the transfer of control.

Conclusion

Contract liability adjusted from $12.4M $14.1M to reflect the revised allocation.

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ASC-606-Revenue.pdf
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FASB Accounting Standards Codification
Topic 606 — Revenue from Contracts with Customers
Identifying Performance Obligations
606-10-25-21
An entity shall account for a contract modification as a separate contract if both of the following conditions are present: a.   The scope of the contract increases because of the addition of promised goods or services that are distinct from the goods or services transferred before the modification. b.   The price of the contract increases by an amount that reflects the entity's standalone selling prices of the additional promised goods or services.
606-10-25-22
If a contract modification is not accounted for as a separate contract, an entity shall account for the promised goods or services not yet transferred on a prospective basis as if it were a termination of the existing contract and creation of a new contract.
ASC 606-10-25 142
JD
Jane D.
2m ago
Is this consistent with our Q3 treatment?
Quillon
just now
Yes — same basis per ASC 606-10-25-21. Implementation services were treated as distinct in Q3.
Resolve
Reply
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