Under ASC 606, when should revenue be recognized?

Revenue should be recognized under ASC 606 when control of the promised goods or services is transferred to the customer. This principle is central to the revenue recognition framework established by ASC 606 and reflects the idea that revenue should be recognized in a way that aligns with the actual transfer of value to the customer.

The concept of "control" encompasses the ability to direct the use of, and obtain the benefits from, the asset being transferred. This means that revenue is recognized at the point in time when the customer has the power to decide how to use the asset and derive its benefits, rather than merely when payment is received or when an invoice is issued. This approach ensures that financial statements provide a more accurate reflection of a company's performance by only recognizing revenue when it is truly earned rather than on a cash basis or upon shipment or billing.