Revenue recognition under ASC 606 is the US accounting standard for when revenue counts as earned: as each promise in a customer contract is fulfilled, not when the invoice is sent or paid.
A worked example
An example with made-up round numbers. A customer signs a 12-month subscription for $12,000, paid up front on January 1. The cash arrives in January, but revenue is recognized ratably as the service is delivered: $1,000 a month. At the end of March, $3,000 has been recognized and $9,000 is deferred revenue. If the contract also includes a $6,000 setup service that counts as a separate promise, the $18,000 total is allocated between the two by standalone selling price, and each part follows its own timing. Whether the setup is separate is a judgment for finance.
What sales systems owe finance
ASC 606 (FASB ASU 2014-09) sets five steps: identify the contract, identify the performance obligations, determine the transaction price, allocate it to the obligations, and recognize revenue as each one is satisfied. The judgments belong to finance and its auditors. What the CRM and billing system owe them is clean inputs: signed terms, start and end dates on every line, each amendment dated from the change, and invoices that tie back to the order. When finance rebuilds a schedule in a spreadsheet at month-end, look for the deal term that was captured in email instead of on the record. The finance page sets out what Kugamon produces and where your ledger takes over.
In Salesforce
Sales Cloud doesn’t recognize revenue. The Opportunity records what was sold, the standard Amount field ignores term, and Salesforce’s product schedules can split an opportunity product’s revenue into installments for forecasting, but none of that is a revenue schedule finance can book. Recognition usually happens in the ERP or a revenue subledger, fed from the CRM. Salesforce sells Revenue Cloud Billing separately from Revenue Cloud Advanced, and billing-first vendors sell ASC 606 automation as its own product, such as Zuora Revenue.
How Kugamon handles it
Kugamon is not an ASC 606 subledger. Its optional Revenue Management add-on creates monthly Revenue records from Orders on release, or from Invoices when they are sent or posted, at the event you choose in Kugamon Settings. A three-year order invoiced annually creates 36 records on release, or 12 as each invoice is processed. A subscription can recognize a larger share in its first month, and a Posted/Locked flag stops edits and un-release. It is a recognition and reporting layer: it doesn’t automate the five-step model or allocate standalone selling prices. Your accounting system books the result.
Related terms
- Amendment
- Total contract value (TCV)
- Annual recurring revenue (ARR)
- Quote-to-cash
- Usage-based billing
- Revenue Cloud Billing
Source: storage.fasb.org