Abstract:
The report summarizes the requirements of ASC 606 — the U.S. GAAP standard for revenue from contracts with customers — and related guidance on contract costs (under ASC 340-40). It provides interpretative guidance and analysis for applying the standard across industries, including clarity on common judgment-intensive issues (e.g. identifying performance obligations, timing of revenue recognition, principal-versus-agent assessments, variable consideration, and accounting for costs). The latest 2025 update reflects recent amendments and developments, and includes an Appendix that outlines significant changes from prior versions — making it current and relevant for recent practice.
Why it Matters:
Revenue is one of the most important indicators of a company’s performance, and mistakes in applying ASC 606 can materially distort financial results. EY’s guidance helps organizations navigate complex judgment calls—such as identifying performance obligations, assessing variable consideration, and accounting for contract costs—so revenue is recognized accurately and consistently. The report reflects current practice and recent updates, reducing the risk of compliance issues, audit challenges, or restatements. By offering clear, standardized interpretations, it supports more transparent and comparable financial reporting for investors and stakeholders.
