ASC 606 for Usage-Based Pricing 2025: Recog...

Usage-based pricing creates unique ASC 606 compliance challenges. Learn how to recognize revenue correctly.

ASC 606 Basics

ASC 606 requires recognizing revenue when performance obligations are satisfied. For usage-based pricing, this means when usage occurs.

Variable consideration, usage caps, and true-up provisions complicate recognition. Each requires specific accounting treatment.

Recognize revenue as usage occurs if measurable. For estimates, use expected value or most likely amount methods with constraints.

Document recognition policies, maintain usage records, and prepare for auditor questions. Clear policies reduce audit risk.

Generally when usage occurs and is measurable. If billed in arrears, accrue revenue for usage delivered but not yet billed.

Use expected value method with constraint for variable consideration. Be conservative and document your estimation approach.

ASC 606 compliance for usage-based pricing requires careful attention to timing and documentation. Establish clear policies early.