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1. Scope Evaluation ASC 606-10-25-4

Prerequisite Gate·ASC 606-10-25-4

Enforceable Contract Existence

A contract does not exist under ASC 606 if each party possesses the right to terminate a wholly unperformed contract without penalty. Confirm whether either of the following conditions of performance has occurred:

1. Transfer of Promised Goods or Services25-4aThe entity has transferred, or has initiated the transfer of, promised deliverables to the customer under the contract.2. Consideration Received or Due25-4bThe entity has received consideration, or maintains an enforceable right to bill and receive consideration, for promised deliverables.

Out of Scope / Wholly Unperformed: If both parties hold penalty-free termination rights and neither condition is met, no contract exists under ASC 606. Stop evaluation; do not apply Steps 1 through 5.