ASC 606 Revenue Recognition
Visor Studio · Tax & Accounting · Generated September 21, 2026
ASC 606 Revenue Recognition
Performance-obligation allocation + monthly recognition waterfall + deferred revenue balance.
Contract
Performance obligations
| Name | SSP | Pattern | Delivery M | Duration M | Allocated | |
|---|---|---|---|---|---|---|
| 96,000 | ||||||
| 19,200 | ||||||
| 4,800 |
Monthly recognition + deferred balance
Recognition waterfall
| Month | Recognized | Cumulative | Deferred balance |
|---|---|---|---|
| M1 | 8,000 | 8,000 | 112,000 |
| M2 | 27,200 | 35,200 | 84,800 |
| M3 | 12,800 | 48,000 | 72,000 |
| M4 | 8,000 | 56,000 | 64,000 |
| M5 | 8,000 | 64,000 | 56,000 |
| M6 | 8,000 | 72,000 | 48,000 |
| M7 | 8,000 | 80,000 | 40,000 |
| M8 | 8,000 | 88,000 | 32,000 |
| M9 | 8,000 | 96,000 | 24,000 |
| M10 | 8,000 | 104,000 | 16,000 |
| M11 | 8,000 | 112,000 | 8,000 |
| M12 | 8,000 | 120,000 | 0 |
What it calculates
ASC 606 sets a single model for recognising revenue from contracts with customers: revenue is recognised when control of a good or service transfers, in the amount the entity expects to be entitled to. It replaced a patchwork of industry-specific rules with one five-step framework.
How it is calculated
Identify the contract, then the distinct performance obligations within it. Determine the transaction price, including variable consideration constrained to the amount not likely to reverse. Allocate that price across obligations in proportion to standalone selling prices. Recognise revenue as each obligation is satisfied - at a point in time for most goods, or over time where the customer simultaneously receives and consumes the benefit, or where the asset created has no alternative use and there is an enforceable right to payment.
How to read the result
The allocation step is where most of the judgement and most of the restatements live: bundling a discounted licence with premium support shifts revenue between periods depending entirely on the standalone prices you assign. Watch the contract balances, since a growing contract liability means cash collected ahead of delivery, which is a leading indicator, while a growing contract asset means the reverse and carries collection risk.
Worked example
A 120,000 contract bundles a perpetual licence with two years of support. Standalone prices are 100,000 and 50,000, so the allocation is two thirds and one third: 80,000 to the licence, recognised on delivery, and 40,000 to support, recognised at about 1,667 a month over 24 months.
Common questions
- When is revenue recognised over time rather than at a point?
- When one of three conditions holds: the customer consumes the benefit as you perform, as with most services; your work creates or enhances an asset the customer controls; or the asset has no alternative use to you and you have an enforceable right to payment for work completed to date.
- How is variable consideration handled?
- Estimate it using either the expected value or the most likely amount, whichever better predicts the outcome, then apply the constraint: include only the portion for which a significant reversal is not probable. Rebates, penalties, bonuses and refund rights all fall into this category.
- What is a contract asset versus a receivable?
- A receivable is an unconditional right to payment - only the passage of time stands between you and the cash. A contract asset arises when you have recognised revenue but the right to payment still depends on something else, such as completing a further milestone, so it carries performance risk as well as credit risk.
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