What is ASC 606, Revenue from Contracts with Customers?

ASC 606, Revenue from Contracts with Customers, is an accounting standard that provides a comprehensive, industry-neutral revenue recognition model intended to increase financial statement comparability across companies and industries. For the construction industry, it has substantial implications as it changes how and when revenue from contracts is recognized. Under this model, construction companies recognize revenue by transferring promised goods or services to customers in an amount that reflects the consideration they expect to receive. ASC 606 can affect a construction company's financial statements, operations, and tax obligations. It demands that companies disclose more detailed revenue and contract information than before. Therefore, understanding ASC 606 is critical for construction industry stakeholders to assess a company's performance and future prospects accurately.