---
title: "Step 5: Recognize Revenue"
description: Learn how to recognize revenue under ASC 606 as performance obligations are satisfied, including "over time" vs. "at a point in time" recognition.
sidebar_position: 6
slug: /asc-606/step-5-recognize-revenue
keywords:
  - ASC 606 step 5
  - revenue recognition
  - over time recognition
  - point in time recognition
  - SaaS revenue schedules
---

# Step 5: Recognize Revenue

The final step in the ASC 606 framework is to **recognize revenue** when (or as) the entity satisfies a performance obligation by transferring a promised good or service to a customer.

## Transfer of Control

Revenue is recognized when the customer obtains **control** of the asset. Control can be transferred either over time or at a point in time.

### 1. Recognition Over Time
Revenue is recognized over time if one of the following criteria is met:
- The customer simultaneously receives and consumes the benefits provided by the entity’s performance (e.g., a **SaaS subscription**).
- The entity’s performance creates or enhances an asset that the customer controls as the asset is created or enhanced.
- The entity’s performance does not create an asset with an alternative use to the entity, and the entity has an enforceable right to payment for performance completed to date.

### 2. Recognition at a Point in Time
If a performance obligation is not satisfied over time, it is satisfied at a point in time. Indicators of transfer of control include:
- The entity has a present right to payment for the asset.
- The customer has legal title to the asset.
- The entity has transferred physical possession of the asset.
- The customer has the significant risks and rewards of ownership.

## Platform Implementation

The Finance Automation Platform serves as your **Sub-ledger of Truth**, automating the complex accounting entries required for Step 5.

### Automated Revenue Scheduling
- **Daily Pro-rata Recognition**: The platform generates granular revenue schedules that recognize revenue on a daily basis for subscriptions, ensuring perfectly balanced month-end closes.
- **Event-Based Triggers**: For point-in-time obligations (like professional services milestones), the platform automatically releases revenue the moment the milestone is marked as "Complete" in your project management system.

### Contract Modifications & Catch-ups
- **Prospective vs. Retrospective**: When a contract changes mid-stream, the platform automatically calculates whether to adjust future revenue (prospective) or perform a "cumulative catch-up" adjustment in the current period.
- **Dual Reporting**: Support for both ASC 606 and older standards simultaneously during transition periods or for comparative reporting.

### Disclosure Reporting
- **Revenue Waterfall**: Generate comprehensive waterfall reports showing recognized, deferred, and forecasted revenue by customer, product, or region.
- **Deferred Revenue Roll-forward**: Automatically reconcile your opening and closing deferred revenue balances for audit purposes.

## Practical Examples

### SaaS Subscription (Over Time)
A customer signs a $12,000 annual contract starting January 1st.
- **Recognition**: The platform recognizes $1,000 of revenue at the end of every month (or ~$32.87 daily).
- **Accounting**: Each month, the platform automatically moves $1,000 from **Deferred Revenue** to **Recognized Revenue**.

### Perpetual License (Point in Time)
A customer purchases a legacy on-premise software license for $50,000.
- **Recognition**: The full $50,000 is recognized as revenue the moment the license key is delivered and control is transferred.
- **Accounting**: A single entry for the full amount is posted to the general ledger.