Section 3: 25–35%3C

Revenue Recognition

Exam insight

ASC 606 is one of the most-tested topics in FAR, and the 5-step model shows up in both MCQs and sims. The setup to watch 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, where you split the price across them using standalone selling prices, not an even 50/50 share.

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

Patterns in this topic

The exam re-skins the same archetypes. Recognize these here, then drill them in the Pattern Lab.

The Five-Step SplitFind the obligations, set the price, split it by standalone selling price, and recognize as each obligation is satisfied.

Exam tip

Study smarter: before you expand each card, cover the screen and try to recall what the concept means from its title alone. Retrieving it from memory builds the recall the exam actually tests, and it beats re-reading.