By Josh Cross, CPA, Principal

After all the research and analysis put in working through the prior four steps, you are now able to begin the process for recognizing revenue for the transaction price (Step 3) which has been allocated to each performance obligation (Step 4).

Each performance obligation identified in Step 2 can be satisfied by either the transfer of a promised good or by performing a service to the customer. This distinction will be the main driver for the next decision that needs to be made, and that is, whether the revenue needs to be recorded over time or at a point in time. For a good majority of the identified performance obligations, a good or service will be transferred/consumed over a period of time and therefore revenue would be recognized over that same time period. ASC 606 has helped in this analysis by providing guidance, so to recognize revenue over time, one of the following criteria needs to be met: (more…)