Revenue Recognition
Revenue recognition is the accounting principle that determines when revenue should be recorded in financial statements. Under ASC 606 and IFRS 15, revenue is recognized when control of goods or services transfers to the customer.
Key Details
- ASC 606 five-step model: identify contract, identify obligations, determine price, allocate price, recognize revenue
- Point-in-time recognition applies when control transfers at a specific moment (product delivery)
- Over-time recognition applies when control transfers gradually (subscription services, long-term contracts)
- Multi-element arrangements require allocating transaction price to separate performance obligations