Defining Assets and Liabilities

The Net Contract Asset or Liability per Element journal entry adjusts account balances to present remaining obligations as either contract assets or contract liabilities. The reclassification process reverses any netting entries in the next period. Revenue arrangements with a combination of positive and negative elements are either assets or liabilities.

When the element is a return, the element is treated as an asset or liability per the conditions in the following table:

Positive Billed Amount			Zero Billed Amount			Negative Billed Amount
Positive Recognized Amount	Zero Recognized Amount	Negative Recognized Amount	Positive Recognized Amount	Zero Recognized Amount	Negative Recognized Amount	Positive Recognized Amount	Zero Recognized Amount	Negative Recognized Amount
If the recognized amount – the billed amount > zero, it is an asset. If the recognized amount – billed amount is < zero, it is a liability.	Liability	Asset	Liability	Neither an asset or a liability	Asset	Liability	Liability	If the recognized amount – billed amount is > zero, it is a liability. If the recognized amount – billed amount is < zero, it is an asset.

When the element is not a return or all the elements in a reclass group are returns, the element is treated as an asset or liability per the conditions in the following table:

Positive Billed Amount			Zero Billed Amount			Negative Billed Amount
Positive Recognized Amount	Zero Recognized Amount	Negative Recognized Amount	Positive Recognized Amount	Zero Recognized Amount	Negative Recognized Amount	Positive Recognized Amount	Zero Recognized Amount	Negative Recognized Amount
If the recognized amount – the billed amount is > zero, it is an asset. If the recognized amount – billed amount is < than zero, it is a liability.	Liability	Liability	Asset	Neither an asset or a liability	Liability	Asset	Liability	If the recognized amount – billed amount is > zero, it is a liability. If the recognized amount – billed amount is < zero, it is an asset.

Related Topics

• Types of Reclassification Journal Entries
• Net Contract Asset or Liability per Element

General Notices