As per FASB, ASC 605 talks about the revenue recognition method that companies must follow while validating their revenues. It has been replaced with ASC 606. As per ASC 605, the following four criteria were to be met for revenue recognition:a. Persuasive evidence of an arrangement existsb. Product/service delivery is completec. The seller’s final price for the buyer is fixed and determinabled. Collectibility is reasonably assured

Why it matters

This rule influences how a company is allowed to recognize revenue within its financial statements.

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