Revenue Recognition Standard (ASC 606)

ASC 606 is a standard that guides how companies should recognize revenue, or income, from their sales and contracts. It ensures that revenue is reported in financial statements when it is earned and amounts are realizable, reflecting the actual transfer of goods or services to customers. The standard emphasizes a five-step process: identifying the contract, determining the performance obligations, establishing the transaction price, allocating that price to each obligation, and recognizing revenue as each is fulfilled. This ensures consistent, transparent reporting of revenue across different companies and industries.