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Also known as: rev rec, ASC 606

Revenue Recognition

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Definition

Revenue Recognition: Revenue recognition determines when revenue can be recorded on financial statements. Under ASC 606 (the current standard), revenue is recognized when performance obligations are satisfied—when the customer receives the promised goods or services. For subscriptions, this typically means ratably over the service period.

Example Usage

“An annual $12K contract is recognized as $1K monthly revenue over 12 months, not $12K when signed. ASC 606 requires this matching.”

Common Misconceptions

Recognize revenue when cash arrives. Cash receipt timing differs from revenue recognition timing under accrual accounting.
Revenue recognition is just accounting detail. It affects key metrics, comparisons, and compliance.
Simple products have simple rev rec. Even SaaS can have complex rev rec with implementation services, usage components, etc.

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