ASC 606
Definition
The US GAAP revenue standard, Revenue from Contracts with Customers. It applies a five-step model: identify the contract, identify the performance obligations, determine the transaction price, allocate it to the obligations, then recognise revenue as each obligation is satisfied.
Related Terms in Accounting Principles
IFRS 15
The IFRS revenue standard, Revenue from Contracts with Customers, substantially converged with ASC 606 and built on the same five-step model. It replaced earlier, industry-specific revenue guidance with one principles-based approach.
GAAP
Generally Accepted Accounting Principles, the accounting framework used for US financial reporting and maintained by the Financial Accounting Standards Board. More rules-based than IFRS, and required for SEC registrants.
IFRS
International Financial Reporting Standards, issued by the International Accounting Standards Board and used or permitted in well over a hundred jurisdictions. More principles-based than US GAAP, with differences in areas such as inventory costing and development costs.
Cash Basis Accounting
Recording revenue when cash is received and expenses when cash is paid. Simple and a close proxy for cash position, but it ignores receivables, payables and inventory, so it can misstate profitability in any period. Eligibility is restricted by size and entity type in most tax systems.
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