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.

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