Section 3: 25–35%3C
Revenue Recognition
Exam insight
ASC 606 is one of the most-tested topics in FAR - the 5-step model shows up in both MCQs and sims. The AICPA's favorite trap is variable consideration: it's tempting to include the full variable amount, but you can only count the part that's highly likely not to reverse. Watch for contracts with more than one performance obligation too - you split the price across them using standalone selling prices, not an even 50/50 share.
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What AICPA wants you to know
- 1Apply the 5-step revenue recognition model (ASC 606)
- 2Identify performance obligations in a contract
- 3Determine standalone selling price and allocate transaction price
- 4Recognize revenue at a point in time vs. over time
- 5Account for variable consideration, significant financing, and right of return