Core Principles of ASC 606
ASC 606 uses a five-step model that provides the foundation for revenue recognition. Costpoint users apply these principles to the specific contract structures, project activities, and accounting configurations maintained in the ERP.
- Identify the contract: Determine whether an arrangement with a customer meets the applicable contract criteria.
- Identify performance obligations: Determine the distinct goods or services promised to the customer.
- Determine the transaction price: Establish the consideration expected in exchange for transferring the promised goods or services.
- Allocate the transaction price: Assign consideration to performance obligations based on the applicable allocation method.
- Recognize revenue: Record revenue when or as each performance obligation is satisfied.
The appropriate revenue pattern depends on the nature of the contract and how control of the promised goods or services transfers to the customer. For project-based contracts, revenue may be recognized over time when the applicable criteria are met.
ASC 606 in Costpoint Project Accounting
Costpoint can provide the project, contract, labor, cost, billing, and accounting data needed to support revenue analysis. Finance teams establish contract structures and accounting rules that connect project activity with revenue recognition and financial reporting.
For an over-time performance obligation, a measure of progress may be used to determine the amount of revenue recognized during a period. A cost-to-cost measure, for example, can use actual qualifying costs compared with estimated total costs to determine progress.
Assume a contract has $5M of expected revenue and estimated total costs of $4M. If $2M of qualifying costs have been incurred, the project is 50% complete under a cost-to-cost measure. The cumulative revenue indicated by that measure would be $2.5M, subject to the contract terms, applicable accounting requirements, and configured Costpoint treatment.
Contract Data, Revenue Schedules, and Controls
Accurate ASC 606 reporting depends on maintaining reliable contract and project information. Finance teams typically review contract modifications, variable consideration, performance obligations, transaction prices, progress measures, and changes in estimates as part of the revenue process.
Accounting structure is also important because revenue transactions must ultimately be classified and reported through appropriate general-ledger accounts. During invoice workflows, chart of accounts coding can support consistent GL classification as documents move through capture, extraction, validation, matching, approval, and posting.
Costpoint teams should also distinguish revenue recognition from billing. An amount can be recognized as revenue based on satisfaction of a performance obligation while billing and cash collection occur according to separate contractual schedules.
ASC 606 and ERP Workflows
Costpoint serves as the ERP environment where contract, project, accounting, and operational information can be connected. Organizations extending finance workflows around deltek Costpoint should preserve the relationship between contract data, project transactions, accounting configuration, and revenue reporting.
ERP integration is particularly relevant when supporting systems handle customer information, billing, document processing, or financial operations. Maintaining consistent data between connected systems helps finance teams reconcile operational transactions with the accounting records used for ASC 606 reporting.
Revenue accounting can also interact with accounts receivable. Once invoices are generated, customer payments and remittances need to be matched to the appropriate receivable records. cash application workflows can support matching customer payments, identifying unapplied cash and deductions, and posting receipts to the appropriate accounts.
Invoice Processing and ASC 606 Data Quality
Invoice information can provide important supporting data for contract and customer accounting, although invoicing itself does not determine when revenue should be recognized under ASC 606. Finance teams can connect invoice records with contract terms, project activity, and accounting entries to support reconciliation.
Automated invoice processing can organize invoice capture, extraction, validation, matching, GL coding, approval, and posting while maintaining accurate transaction data for downstream financial workflows. When invoice information is synchronized with project and contract records, finance teams have a stronger data foundation for reviewing billing and revenue relationships.
ASC 606 Compared With Other Accounting Topics
ASC 606 is specifically concerned with revenue from contracts with customers. It should be distinguished from other accounting standards that address different transaction types and financial reporting questions.
ASC 815 addresses derivatives and hedging activities, including accounting and reporting considerations for qualifying hedging relationships. Its scope differs from the revenue recognition framework used for customer contracts.
ASC 842 addresses lease accounting and establishes requirements for recognizing and measuring lease-related assets and liabilities. A company may apply ASC 606 and ASC 842 to different arrangements within the same reporting period.
Best Practices for Costpoint ASC 606
Finance teams can strengthen ASC 606 processes by maintaining clear connections between contracts, performance obligations, project activity, revenue calculations, billing, and the general ledger.
- Document the performance obligations and revenue recognition approach for material contract types.
- Review contract modifications and changes in estimates promptly.
- Reconcile project progress and recognized revenue with supporting Costpoint transactions.
- Maintain consistent account and project coding across revenue-related transactions.
- Separate revenue recognition analysis from billing and cash collection schedules.
- Retain supporting documentation for calculations, judgments, approvals, and period-end reconciliations.
These practices help create a repeatable revenue accounting process that supports financial reporting, auditability, and informed project performance analysis.
Summary
Costpoint ASC 606 applies the ASC 606 revenue recognition framework to contract and project accounting workflows maintained in Deltek Costpoint. Effective implementation requires accurate contract data, appropriate performance-obligation analysis, reliable progress measures, controlled accounting configuration, and reconciliation between revenue, billing, receivables, and the general ledger.