FAR — Quick Sheet
Revenue Recognition (ASC 606)
Read time: ~5 minutes
One-minute revision
- 5 steps: Identify contract → Identify performance obligations → Determine price → Allocate price → Recognize revenue
- Over-time recognition if: customer consumes as you perform, OR you're creating/enhancing a customer-controlled asset, OR asset has no alternative use + enforceable right to payment
- Trigger for recognition = transfer of control, not risks/rewards
- Variable consideration included only if probable no significant reversal later
- Contract-acquisition costs (e.g. commissions): capitalize & amortize, unless period ≤ 1 year (expense immediately)
COMMON TRAP: Don't default to "risks and rewards" language from the old standard — ASC 606 is control-based.