BAR, Business Analysis and Reporting

Sources for Revenue Recognition (ASC 606)

Last reviewed 2026-10-06

The standards and authorities behind PocketCPA's BAR lessons on Revenue Recognition (ASC 606). The topic rests on ASC 606; ASC 340-40; ASC 605-35.

About this topic

Revenue recognition settles one question: how much of what a customer promised has the entity actually earned, and in which period. ASC 606 answers it with a five-step model running from the contract to the amount recognized.

Progress = costs incurred to date / total estimated costs

Key points

The five-step revenue model applies to all contracts with customers: identify, allocate, and recognize.
Transaction price allocation uses standalone selling prices; residual approach and adjusted market approach are alternatives when SSP is not directly observable.
Variable consideration is constrained to the amount for which a significant reversal is not probable.
Contract modifications are treated as a separate contract, prospectively, or cumulatively depending on the circumstances.

What the lessons cover

Variable consideration and the constraint
Contract modifications
Principal versus agent, and licensing
Costs of a contract
Stacking the steps: from a constrained transaction price to cumulative revenue
Allocation and the financing split inside a larger problem
Contract cost assets after day one: amortization, impairment, and the order of the tests
Loss contracts: the provision ASC 606 left in ASC 605-35
What gross versus net does to the statements BAR asks the candidate to analyze
The order of operations, end to end

Authoritative references

Contract costs under ASC 340-40:

ASC 340-40-05-1, scope: the incremental costs of obtaining a contract with a customer and the costs of fulfilling one.
ASC 340-40-15-2, 15-3 and 25-6, consideration payable to a customer sent to ASC 606-10-32-25 through 32-27, and fulfillment costs within the scope of another Topic that follow that Topic, including Topic 330, ASC 340-10-25-1 through 25-4, and others.
ASC 340-40-25-1 through 25-4, the asset for incremental costs of obtaining a contract if recovery is expected, the definition of incremental, the expensing of costs incurred regardless of the contract unless explicitly chargeable to the customer, and the practical expedient for an amortization period of one year or less.
ASC 340-40-25-5 through 25-8, the three conditions that capitalize a fulfillment cost, the costs that relate directly to the contract, and general and administrative costs expensed unless explicitly chargeable.
ASC 340-40-35-1 through 35-6, amortization consistent with transfer, the update for a significant change, the impairment test without the constraint and with renewals, the prescribed order of impairment tests, and the bar on reversal.
ASC 340-40-50-2 through 50-6, the judgments described, the closing balances by main category with amortization and impairment, the relief for entities other than public business entities, and the disclosure of an election of the expedient.
ASC 340-40-55-2, 55-3, 55-4, 55-6 and 55-9, the illustrations of legal fees, an asset for obtaining costs, the costs expensed when incurred, and costs to deliver the service.

Loss contracts under ASC 605-35:

ASC 605-35-25-45 through 25-47 and 25-46A, the entire anticipated loss recognized as soon as it becomes evident, the loss test using the transaction price principles without the constraint, and contracts combined under ASC 606-10-25-9 treated as a unit.

Revenue recognition under ASC 606:

ASC 606-10-25-9 through 25-14, contract combination and modifications, a modification that is a separate contract at 25-12, the three branches at 25-13, and the policy election about performance obligations at 25-14 through 25-22.
ASC 606-10-25-27 through 25-33, recognition over time: cumulative revenue as price times progress, and measuring progress by costs incurred over total estimated costs.
ASC 606-10-32-2 through 32-14, the transaction price principles, the expected value or most likely amount method applied consistently, and the constraint on variable consideration with the later recognition once resolved.
ASC 606-10-32-15 and 32-20, the significant financing component, presented separately from revenue.
ASC 606-10-32-25 through 32-27, consideration payable to a customer.
ASC 606-10-32-28 through 32-43, allocation by relative standalone selling price, the estimation methods, the proportionate discount rule and its exception, and no refresh of standalone selling prices after inception.
ASC 606-10-55-36 through 55-40, principal versus agent: the control test, the net commission of an agent, the weighing of indicators at 55-39A, and the effect of novation.
ASC 606-10-55-54, 55-59 and 55-62, symbolic and functional intellectual property and the exception.
ASC 606-10-55-65 and 55-65A, a sales- or usage-based royalty on a license of intellectual property, which displaces the estimate entirely.
ASC 606-10-50, the disclosure package.
ASU 2016-08 and ASU 2016-20, the former indicators superseded and the later amendment that moved a provision back.

How PocketCPA uses these sources

Every lesson is written in original words and cites the paragraph each rule comes from. No standard's text is reproduced. How lessons and questions are written and checked is set out in our methodology.