Onerous (Loss) Contracts
Onerous (Loss) Contracts
The ASC 606 Standard
A contract in which the unavoidable costs of meeting the obligations exceed the expected economic benefits. The entire expected loss must be recognized immediately on the income statement.
The Real-World Scenario
You sign a fixed-price $100,000 consulting deal, but project scope creep means you will now have to spend $120,000 in labor just to finish it.
The Spreadsheet Breaking Point
Manually comparing fixed revenue against spiraling labor costs requires constant cross-referencing between the accounting and operations departments.
The Hidden Cost to the Bottom Line
Failing to recognize the entire expected loss immediately severely misstates the company's current financial exposure to the board.
How GAAPX Eliminates the Risk
Continuously forecasts project costs against fixed revenue, automatically flagging loss contracts and triggering the required immediate loss accrual.