Revenue recognition
Also called ASC 606, IFRS 15
The accounting rules that decide when revenue is recorded, which can differ from when it's invoiced or when the cash arrives.
Under ASC 606 and IFRS 15, revenue is recognized as performance obligations are satisfied, not when an invoice is issued or a payment lands. A twelve-month contract billed upfront is invoiced once but recognized across the year.
For AR teams, the practical point is that invoicing, revenue and cash run on separate clocks. Credit memos, disputes and deductions can affect all three, which is why each one needs clear documentation.
Related terms
- InvoiceA document a seller issues to request payment, listing what was delivered, the amount owed, the payment terms and the due date.
- Credit memoA document that reduces what a customer owes, issued for returns, pricing errors, agreed concessions or approved deductions.
- General ledger (GL)The master record of every financial transaction a company posts, organized by account, from which its financial statements are produced.