ASC 606 is the new revenue recognition standard for all businesses that enter into contracts with customers for the transfer of goods or services—public, private, and non-profit entities. Both private and public companies must ensure ASC 606 compliance. This standard is a joint effort of the Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB). It lays out a framework for more consistent revenue recognition such that there are minimal variations adopted by businesses across industries while accounting for similar transactions.
To follow the guidelines of ASC 606, companies must:a. Identify the contract with a customerb. Identify performance obligations as per the contractc. Determine transaction priced. Allocate transaction pricee. Recognize revenue and & when the entity satisfies the performance obligation