Section 3: 25–35%3C
Revenue Recognition
ASC 606 is one of the heaviest-tested topics in FAR — the 5-step model shows up in MCQs AND sims. AICPA's favorite trap: variable consideration. Candidates want to include the full variable amount, but you must constrain it to the amount that's highly probable not to reverse. Also watch for multiple performance obligations — you must allocate the transaction price based on standalone selling prices, not just split it evenly.
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