Under ASC 606, which approach describes recognizing revenue over time when progress toward completion can be measured reliably?

• A. Percentage-of-completion based on progress toward completion
• B. Completed-contract in full at contract end
• C. Cash-basis recognition
• D. Installment method

Answer: (B)

The main idea is recognizing revenue over time by tying it to how much of the contract has been completed, when you can measure that progress reliably. Under ASC 606, you don’t wait until the end unless you truly can’t measure progress; instead, you use a method that shows revenue as work is performed. The standard way to do this is the percentage-of-completion approach, which recognizes revenue in proportion to the degree of completion. In practice, you pick a reliable progress measure—often costs incurred to date relative to total estimated contract costs (a cost-to-cost approach) or an equivalent milestone-based measure—and match revenue and gross profit to the portion of work completed. This approach reflects the entity’s performance as it delivers goods or services and transfers benefits to the customer as work progresses.

Recognizing all revenue only at contract end (the completed-contract approach) doesn’t align with ASC 606’s emphasis on ongoing performance and progress—so it’s not the appropriate method when progress toward completion can be measured. Cash-basis recognition and installment methods represent different accounting frameworks or special cases and don’t describe the standard over-time recognition under ASC 606.