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Revenue Recognition Navigator

ASC 606 aligns US GAAP revenue recognition with a customer-contract-based model, requiring entities to follow five steps to determine when and how much revenue to recognise.

This navigator guides you through each step — from identifying the contract (ASC 606-10-25-1) to satisfying performance obligations (ASC 606-10-25-23) — and flags common judgment areas including variable consideration constraint, principal vs agent, and licences of intellectual property.

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Step 1Identify the contract

Is there a valid contract with a customer?

A contract must meet all five criteria: (1) the parties have approved the contract; (2) each party's rights are identifiable; (3) payment terms are identifiable; (4) the contract has commercial substance; (5) it is probable the entity will collect substantially all of the consideration. If criteria are not met, revenue is recognised only when consideration received is non-refundable and no remaining performance obligations exist (ASC 606-10-25-7).
Reference: ASC 606-10-25-1

How it works

You describe your contract — the nature of goods or services promised, payment terms, variable consideration components, and any bundled arrangements.

The navigator identifies distinct performance obligations using the separability and capable-of-being-distinct criteria in ASC 606-10-25-19, estimates the transaction price including variable consideration under the constraint in ASC 606-10-32-11, allocates using relative standalone selling prices, and determines whether each obligation is satisfied over time or at a point in time.

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