ASC-606

ASC 606 SaaS billing / revenue recognition.

Definition

ASC 606 (Accounting Standards Codification Topic 606, Revenue from Contracts with Customers) is the US GAAP revenue recognition standard published May 2014 by FASB (Financial Accounting Standards Board) in partnership with IASB (International Accounting Standards Board IFRS 15 equivalent), effective 1 January 2018 public companies + 1 January 2019 private companies, replacing numerous industry-specific precedent guidance (Software Revenue Recognition SOP 97-2 + multiple) ; introduces 5-step model: (1) Identify contract, (2) Identify performance obligations, (3) Determine transaction price, (4) Allocate transaction price, (5) Recognize revenue when/as performance obligations satisfied. Platform + workflow detail integration ERP + CRM + general ledger + subscription lifecycle management + plans + pricing + dunning + collections + revenue schedules + accounting + multiple deployments enterprise + SMB customers; native integration Salesforce + NetSuite + SAP + Workday + multiple accelerating SaaS Subscription Economy 2020s+ adoption.

Origin

ASC 606 published May 2014 by FASB + IASB collaboration ; effective January 2018 public + 2019 private ; replaced SOP 97-2 + multiple industry-specific guidance.

Example in context

SaaS company sells subscription bundled with implementation services ASC 606 5-step analysis: (1) Contract signed with customer 12-month subscription $120K + implementation $30K, (2) 2 performance obligations identified - software subscription + implementation services, (3) Transaction price $150K, (4) Allocate based standalone selling prices ($120K subscription + $30K implementation), (5) Recognize $120K straight-line over 12 months as service delivered + $30K upon implementation completion.

Related terms

• IFRS 15 — international equivalent IASB.