ASC 606

Accounting Standards Codification (ASC) 606 is a standard framework for revenue recognition developed by the Financial Accounting Standards Board (FASB) for companies operating within the United States. It went into force on December 15, 2017 for publicly traded companies, and on December 15, 2018 for private and non-profit companies.

ACS 606 established the following 5-step process for revenue recognition:

1. Identify the contract with a customer

2. Define performance obligations

3. Calculate the transaction price

4. Allocate the transaction price

5. Recognize revenue upon completion of performance obligations

ASC 606 establishes clear guidelines and regulations for how businesses accurately record their transactions that must be reflected in compliance and reporting processes. As a result, ASC 606 introduces complexity to data management processes – especially for subscription and use-based revenue models that offer significant contract flexibility.

Related terms

ASC 606

Accounting Standards Codification (ASC) 606 is a standard framework for revenue recognition developed by the Financial Accounting Standards Board (FASB) for companies operating within the United States.

Account Reconciliation

Account reconciliation is the process of comparing two sets of records to ensure their accuracy and consistency.

Accounts Payable

Accounts payable (AP) refers to the amount of money that a business owes to its suppliers or creditors for goods or services purchased on credit.

Accounts Payable Automation

Accounts payable automation (AP Automation) refers to the use of technology and software solutions to streamline and optimize the accounts payable process within an organization.

Accounts Receivable Aging

Accounts receivable aging is a reporting process that categorizes unpaid invoices and credit memos according to how long they remain outstanding. They are typically sorted into 30-day ranges (0-30 days, 31-60 days, 61-90 days), and this report is how companies calculate their days sales outstanding (DSO) average.

Accounts Receivable Turnover

The accounts receivable turnover ratio (or debtor turnover ratio) allows businesses to evaluate their debt collection efficiency.