A complete memo walks each step and shows the reasoning, not just the conclusion:
- Contract and obligations — the promises in the contract, which are distinct, and how any material rights or options were treated.
- Transaction price — fixed consideration, any variable consideration and how it was estimated and constrained, significant financing components, and noncash or payable-to-customer amounts.
- Allocation — standalone selling prices and the method used where they are not directly observable.
- Recognition — point in time or over time, the criterion relied on, and the measure of progress if over time.
The memo exists to give an auditor a traceable record of the judgment. A conclusion with no visible path from the guidance to the answer is the thing that gets questioned.
Frequently asked questions
A technical accounting memo is a written analysis that applies the relevant accounting guidance to a specific set of facts and reaches a documented conclusion. It records the facts considered, the guidance applied, the judgments made, and the accounting result — so the position can be reviewed and defended later.
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Related
References: FASB ASC 606, Revenue from Contracts with Customers. This page is general information, not accounting advice for a specific entity.
Written and maintained by the Gaapio team of CPAs. Last reviewed August 2026.