Section 2: 35–45%B6
Revenue Recognition (Advanced ASC 606)
Exam Insight
Revenue is the single largest line on most income statements and the area with the highest restatement and fraud risk, so the AICPA tests ASC 606 heavily on BAR through multi-step judgments like variable consideration, allocation, and over-time recognition. Mastery of the five-step model lets you handle the layered fact patterns and journal entries that simpler FAR questions never reach.
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What AICPA Wants You to Know
- 1Apply the five-step ASC 606 model from contract identification through recognition.
- 2Estimate variable consideration using expected value or most-likely-amount and apply the constraint.
- 3Allocate the transaction price to performance obligations based on relative standalone selling prices.
- 4Distinguish point-in-time from over-time recognition and measure progress correctly.
- 5Account for contract modifications, principal vs. agent, warranties, and significant financing components.
- 6Classify and record contract assets, contract liabilities, and receivables.