USA Contingent Asset

[primetime30]

I'm an engineer at a large corporation looking for some guidance for what I think is called a "contingent asset". In my case, a customer has agreed to pay for engineering work to develop a product. The cost of this engineering work is not included in the future price (revenue) of the product but is incremental. What is the common practice/requirement for allowing this credit to be recognized as an engineering credit as the work is performed? Is a purchase order sufficient? Does the PO have to include guarantees that the cost is recovered? Thanks in advance for any attempt to answer this question.

 

[bklynboy]

I am not entirely clear on this arrangement. However, if you are asking for accounting guidance, US GAAP does not permit contingent assets to be recognized until they actually occur. If your arrangement is that you aere incurring some upfront costs to obtain future revenue, then there could be an opportunity to set up a deferred asset for costs you are incurring that will be realeased to expense as sale are generated.

Hard for me to say without knowing more of the particulars here. I also assume the question is from the point of view of the customer and not your end and is not R&D type spends.