FASB ASC 605 Revenue Recognition


The Financial Accounting Standards Board (FASB) released Accounting Standards Codification 605 (ASC 605) to address the matter of revenue recognition.  The time period in which revenue can be recognized by a company is a founding principle among the financial markets.  Company earnings significantly affect stock prices and shareholders stand to gain or lose substantial amounts of money because of improper recognition.  Management is often tempted to recognize revenue too early, in order to make current quarter/year performance appear better than it is.  Because of this, the FASB release this standard defining the characteristics for when revenue can and cannot be recognized for a company.

Check out more high level explanations of the FASB ASC in our Guide to the Accounting Standards Codification!

For more in depth information on this and other FASB ASC topics, check out the following books.

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