Accounting

ASC 606

Quick definition

GAAP revenue recognition standard for contracts with customers.

ASC 606 is the US GAAP standard for recognizing revenue from contracts with customers. It requires a 5-step model: identify the contract, identify performance obligations, determine transaction price, allocate price, and recognize revenue as obligations are satisfied. Matters for SaaS (deferred revenue), usage-based pricing, and multi-element arrangements.

Related accounting terms

ASC 718
GAAP rules for expensing stock-based compensation.
ASC 842
GAAP standard requiring leases to be recognized on the balance sheet.
Deferred Revenue
Cash received in advance of delivering the service.
Accrual vs. Cash Accounting
Accrual recognizes revenue/expense when earned; cash when money moves.

See this in action

Insights and tools where ASC 606 shows up.

insight
SaaS Revenue Recognition Under ASC 606: A Founder's Guide to Getting It Right

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