Costs to Obtain a Contract
Costs to Obtain a Contract
The ASC 606 Standard
Incremental costs of obtaining a contract, such as sales commissions, that the entity expects to recover and must capitalize. These costs are then amortized over the expected period of benefit.
The Real-World Scenario
You pay a sales rep a $5,000 commission for closing a 3-year enterprise deal; that $5,000 must be spread across the 3 years.
The Spreadsheet Breaking Point
Tying individual sales rep commission payouts to the specific amortization schedule of the underlying customer contract breaks manual spreadsheets.
The Hidden Cost to the Bottom Line
Expensing massive commission payouts upfront instead of capitalizing them violently destroys your short-term profitability metrics.
How GAAPX Eliminates the Risk
Automatically links commission payout data to the revenue contract, capitalizing and amortizing the expense in perfect lockstep with the revenue.