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At a glance

  • ASC 606 is the core US GAAP revenue-recognition model for contracts with customers.
  • It uses a five-step structure similar to IFRS 15.
  • Practical work often turns on contract identification, performance obligations, variable consideration, and disclosure.

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In plain language

ASC 606 is the main US GAAP answer to the question, “When should you book revenue from a customer contract?” It asks you to work through the contract carefully rather than relying on invoice timing or legacy industry habits.

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Who this applies to

ASC 606 applies to entities that recognize revenue from customer contracts, subject to scope exceptions such as leases, insurance contracts, financial instruments, guarantees, and certain nonmonetary exchanges.

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Core principles

  1. Identify the contract.
  2. Identify the performance obligations.
  3. Determine the transaction price.
  4. Allocate the transaction price.
  5. Recognize revenue when, or as, obligations are satisfied.

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Recognition, measurement, presentation, and disclosure

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Recognition

Revenue is recognized when control of the promised good or service transfers. That can happen over time or at a point in time, depending on the fact pattern.

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Measurement

Transaction price analysis covers variable consideration, financing components, non-cash consideration, and consideration payable to a customer. Judgment and constraint analysis matter because overstated revenue can unwind later.

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Presentation

The codification distinguishes receivables, contract assets, and contract liabilities so the statement presentation reflects the nature of the right or obligation.

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Disclosure

Disclosure is intended to explain the nature, timing, and uncertainty of revenue and cash flows from contracts with customers.

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Effective date and transition

ASC 606 is effective for public business entities for annual reporting periods beginning after 2017-12-15, with later effective dates for certain nonpublic entities. Transition can be full retrospective or modified retrospective, depending on the reporting choice made.

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Amendments and status

This page is the current canonical page for ASC 606. It replaced much of the fragmented legacy revenue guidance that previously sat in ASC 605.

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Source references