ASC 606 vs IFRS 15 Differences, With Worked Examples
ASC 606 and IFRS 15 came out of one joint project and share the same five-step model, almost word for word. The differences come from later amendments. The FASB issued ASU 2016-10 and ASU 2016-12. The IASB issued narrower Clarifications to IFRS 15 in April 2016 and declined to amend collectability or noncash consideration. The FASB has kept adding changes since, such as ASU 2021-08 for business combinations. The result is a short list of differences, and each one moves revenue, profit or a balance sheet line for the same transaction. This page lists them in one table, then runs the numbers on each.
Summary table: ASC 606 vs IFRS 15
| Area | US GAAP (ASC 606, ASC 340-40) | IFRS 15 | Effect on the numbers |
|---|---|---|---|
| Collectibility threshold | "Probable" means likely to occur, read in practice as roughly 70–80% | "Probable" means more likely than not (above 50%) | Some contracts pass Step 1 under IFRS and fail under US GAAP, so revenue is deferred under US GAAP |
| Cash received when Step 1 fails | Three events allow revenue, including a third added by ASU 2016-12 (25-7(c)) | Two events only (IFRS 15.15) | US GAAP can release nonrefundable cash to revenue sooner |
| Shipping and handling after control passes | Policy election to treat it as a fulfillment cost | No election. Assess whether it is a separate performance obligation | US GAAP recognizes all revenue at shipment. IFRS may defer the shipping portion |
| Sales and similar taxes | Policy election to exclude all of them from revenue | Jurisdiction-by-jurisdiction principal analysis | Revenue can be higher (gross) under IFRS |
| Noncash consideration | Fair value at contract inception | Fair value, measurement date not specified | Revenue can differ when the asset's value moves before payment |
| Licenses of IP | Functional vs symbolic classification. Renewals not recognized before the renewal period starts | Right to access vs right to use, based on the licensor's activities. No renewal-specific rule | Timing can differ by years |
| Immaterial promised goods or services | May be ignored if immaterial to the contract | No expedient. General materiality applies | Usually the same. Can differ in high-volume businesses |
| Impairment of contract cost assets | Reversal prohibited | Reversal required when conditions improve | Higher asset and lower later expense under IFRS |
| Acquired contract liabilities (business combinations) | Measured as if the acquirer had originated the contract (ASU 2021-08) | Fair value (IFRS 3) | Post-deal revenue and goodwill differ |
| Onerous (loss-making) contracts | No general rule. Losses accrued only under specific guidance | IAS 37 provision for every onerous contract | Earlier loss under IFRS |
| Share-based payments to customers | Measured under ASC 718 at grant date (ASU 2019-08) | No specific guidance | The revenue reduction can differ |
| Interim and private-company disclosures | More interim disclosure for public entities. Reliefs for nonpublic entities | Interim: disaggregation only. No private-company relief under full IFRS | Disclosure only, no effect on measurement |
1. Collectibility: the same word, a different probability
Step 1 of both standards requires that collection of the consideration be "probable" before a contract exists for revenue purposes. ASC 606-10-25-1(e) asks whether it is probable the entity will collect substantially all of the consideration it will be entitled to. IFRS 15.9(e) has the same structure. The difference is the meaning of the word. US GAAP uses its long-standing definition, "likely to occur." IFRS uses "more likely than not." Neither standard gives a percentage. Big Four comparisons describe the US GAAP bar as about 70% (Deloitte), about 75% (PwC) or 75–80% (KPMG), against just over 50% under IFRS.
US GAAP also has extra guidance that IFRS 15 lacks. ASC 606-10-55-3A to 55-3C (added by ASU 2016-12) say the assessment is about whether a substantive transaction exists. The entity looks only at the goods or services it will actually transfer, and it can take into account its ability to stop supplying a customer who does not pay.
The second difference is what happens to cash received when a contract fails Step 1. Both standards allow revenue if the entity has no remaining obligations and has received all, or substantially all, of the consideration, which is nonrefundable. Both also allow revenue if the contract has been terminated and the consideration is nonrefundable (ASC 606-10-25-7(a)–(b), IFRS 15.15). US GAAP adds a third event in 25-7(c). It applies when the entity has transferred control of the goods the cash relates to, has stopped transferring goods, and has no obligation to transfer more, and the cash received is nonrefundable.
Worked example
A supplier delivers equipment for $100,000 to a new customer with a weak credit history. The customer pays a $10,000 nonrefundable deposit. The supplier judges the chance of collecting substantially all of the remaining amount at 60%. It has no further obligations and will not supply more until it is paid.
| IFRS 15 | ASC 606 | |
|---|---|---|
| Step 1 met? | Yes: 60% is above 50% | No: 60% is below "likely" |
| Revenue on delivery | $100,000 | $10,000 (the deposit, under 25-7(c)) |
| Receivable | $90,000, with a credit loss allowance under IFRS 9 shown as an expense, not as lower revenue | None. Later cash is recognized as revenue when received, unless a reassessment shows the contract now meets Step 1 |
One caution applies under both standards. If the 60% reflects a price concession the supplier expects to give, that is variable consideration, not a collectibility problem. Estimate the concession first, then test collectibility on the reduced amount.
2. Shipping and handling: a US-only election
Under both standards, shipping before the customer obtains control is a fulfillment activity, not a separate promise (ASC 606-10-25-18A). The difference is shipping after control passes, for example goods sold FOB shipping point. ASC 606-10-25-18B lets an entity elect to treat that shipping as a fulfillment cost. If it elects, the whole price is recognized when control transfers and the shipping cost is accrued. IFRS 15 has no such election. The entity has to decide under IFRS 15.22 whether delivery is a distinct service and therefore a separate performance obligation.
Worked example
An online retailer ships goods on 30 December, FOB shipping point. It charges $2,000 for the goods and $100 for delivery. The carrier costs $70. The parcel arrives on 4 January, and the year ends on 31 December. Standalone selling prices equal the stated prices.
- US GAAP with the election: $2,100 of revenue on 30 December, and the $70 cost accrued in December.
- IFRS 15: two performance obligations. $2,000 is recognized on 30 December. The $100 is recognized as the delivery service is performed, so most of it falls in January. If the retailer is only arranging delivery by a carrier that is the principal, it recognizes just its net margin on the shipping.
If the goods were sold FOB destination, control would pass on delivery and both frameworks would recognize everything on 4 January.
3. Sales and similar taxes: gross or net
Both standards exclude amounts collected on behalf of third parties from the transaction price (IFRS 15.47). Under IFRS, that means analysing each tax in each jurisdiction. If the entity is the party legally liable for a tax, the tax is part of its revenue and also an expense. US GAAP offers a shortcut. ASC 606-10-32-2A, added by ASU 2016-12, allows an election to exclude from revenue all sales, use, value-added and some excise taxes that are imposed on a revenue transaction and collected from customers at the same time. Taxes on the entity's total gross receipts, and taxes imposed during inventory purchasing, are outside the election.
Worked example
A seller invoices $10,000 + $500 excise tax. Local law makes the seller liable for the tax. Cost of the goods is $6,000.
- US GAAP with the election: revenue $10,000, gross margin $4,000 (40.0%).
- IFRS 15, if the analysis concludes the seller is the principal for the tax: revenue $10,500, cost of sales $6,500, gross margin $4,000 (38.1%).
Profit is identical. Revenue and margin ratios are not, which matters for revenue-based covenants, multiples and peer comparisons.
4. Noncash consideration: when to measure it
Both standards measure noncash consideration, such as shares, goods or crypto assets received from a customer, at fair value (ASC 606-10-32-21, IFRS 15.66). US GAAP fixes the date at contract inception. It also splits later changes in value into two kinds (ASC 606-10-32-23):
- Changes caused by the form of the consideration, such as a share price moving, never touch revenue.
- Changes for other reasons, such as the number of shares depending on performance, are variable consideration and subject to the constraint.
IFRS 15 addresses the second kind (IFRS 15.68) but does not specify a measurement date. In April 2016 the IASB decided not to add one.
Worked example
A consultancy signs a contract on 1 March and will be paid 1,000 shares of the client on completion on 30 June. The share price is $20 on 1 March and $26 on 30 June.
- US GAAP: the transaction price is fixed at $20,000. The $6,000 rise in value comes from the form of payment, so it is not revenue. It is accounted for under the guidance for the asset received (for equity securities, ASC 321) outside revenue.
- IFRS 15: the entity sets an accounting policy. Measuring at inception gives $20,000 of revenue. Measuring when the shares are received or the work is complete gives $26,000. Both are seen in practice.
5. Licenses of intellectual property
Both standards ask whether a licence is a right to access IP (revenue over the licence term) or a right to use IP as it exists when granted (revenue at a point in time). They answer the question differently.
- US GAAP classifies the IP itself (ASC 606-10-55-59 to 55-63). Functional IP has significant standalone functionality, such as software, drug formulas or a finished film. It is generally a right to use. Symbolic IP, such as brands, logos and franchise rights, gets its value from the licensor's past or ongoing activities. It is always a right to access.
- IFRS 15 asks whether the licensor will carry out activities that significantly affect the IP the customer has rights to, among other criteria (IFRS 15.B58). If so, the licence is a right to access. If not, it is a right to use.
The two usually reach the same answer. They can split when a symbolic licence has no ongoing licensor activity. Take a 5-year, $500,000 licence of the logo of a brand the licensor no longer supports or promotes. Under US GAAP, the logo is symbolic, so revenue is $100,000 a year. Under IFRS, if no activity significantly affects the IP, the licence is a right to use, so $500,000 is recognized when the customer can first use it.
Renewals
Neither framework allows revenue for a right-to-use licence before the customer can use and benefit from it (ASC 606-10-55-58C, IFRS 15.B61). ASU 2016-10 applied this test explicitly to renewals, so under US GAAP renewal revenue cannot be recognized before the renewal period begins. IFRS 15 has no renewal-specific wording, so recognition can be earlier. KPMG describes the IFRS outcome as an accounting policy choice: recognize when the renewal is agreed, or when the renewal period begins.
Example: a customer has a 3-year term licence of on-premise software. In year 2 it pays $180,000 to extend the licence for years 4 and 5, and it already holds the software. Under US GAAP, the $180,000 is recognized at the start of year 4. Under IFRS with an "agreed" policy, it is recognized in year 2. Any bundled support (PCS) is recognized over its service period under both.
US GAAP also says that restrictions of time, geography or use are attributes of a single licence. It says when a contract instead grants additional rights that are a separate licence (ASC 606-10-55-64 and 55-64A). IFRS 15.B62 disregards such restrictions when classifying a licence but gives no equivalent guidance on additional rights.
6. Immaterial promised goods or services
ASC 606-10-25-16A, added by ASU 2016-10, lets an entity skip assessing whether a promise is a performance obligation if it is immaterial in the context of the contract. If revenue is recognized before that item is delivered, its cost is accrued. The expedient does not apply to customer options that may be material rights (25-16B). The IASB did not add this to IFRS 15. IFRS reporters apply general materiality, which looks at the financial statements as a whole rather than one contract.
Example: a $50,000 machine sale includes a short online orientation session worth about $100. A US GAAP reporter can recognize $50,000 on delivery and accrue the session's cost. An IFRS reporter usually reaches the same answer. The exception is a business that sells thousands of such contracts, where the sessions are material in total and must be treated as a performance obligation.
7. Capitalized contract costs: reversing an impairment
Both frameworks capitalize the incremental costs of obtaining a contract, such as sales commissions, and qualifying fulfillment costs. Both test them for impairment the same way: compare the carrying amount with the remaining consideration less the remaining directly related costs (ASC 340-40-35-3, IFRS 15.101). The difference comes afterwards. IFRS 15.104 requires a reversal when conditions improve, capped at the carrying amount the asset would have had with no impairment. ASC 340-40-35-6 prohibits reversal. The mechanics of capitalizing commissions are covered in deferred commissions under ASC 606 (ASC 340-40).
Worked example
A commission of $12,000 is capitalized and amortized over 4 years ($3,000 a year).
| IFRS 15 | US GAAP | |
|---|---|---|
| End of year 1, before the test | $9,000 | $9,000 |
| Test: remaining consideration less costs = $6,000. Impairment loss | ($3,000) | ($3,000) |
| Year 2 amortization ($6,000 ÷ 3) | ($2,000) | ($2,000) |
| End of year 2 carrying amount | $4,000 | $4,000 |
| A price increase lifts the test amount to $7,500. Cap = $12,000 − 2 × $3,000 = $6,000 | Reversal +$2,000 | No reversal |
| Carrying amount after the test | $6,000 | $4,000 |
| Amortization in years 3 and 4 | $3,000 a year | $2,000 a year |
The total expense over the 4 years is $12,000 under both frameworks. IFRS spreads it differently: $6,000, $0, $3,000, $3,000. US GAAP gives $6,000, $2,000, $2,000, $2,000.
8. Business combinations: acquired deferred revenue
This difference sits in the business combinations standards, but it hits revenue directly. IFRS 3.18 measures assumed liabilities, including contract liabilities, at acquisition-date fair value. That is usually the cost to fulfil plus a margin, which is often well below the target's deferred revenue balance. ASU 2021-08 (ASC 805-20-30-28) moved US GAAP away from fair value. The acquirer measures contract assets and liabilities under ASC 606 as if it had originated the contracts itself. The ASU is effective for public business entities for fiscal years beginning after 15 December 2022, and for all other entities a year later.
Example: a target has $1,200,000 of deferred SaaS revenue for the next 12 months, with a fair value of $450,000. After the acquisition, an IFRS acquirer recognizes about $450,000 of revenue from those contracts. A US GAAP acquirer recognizes about $1,200,000. Goodwill is correspondingly lower under IFRS, before tax effects.
9. Onerous contracts
ASC 606 contains no onerous-contract test, and neither does IFRS 15. Under IFRS, IAS 37.66 requires a provision for any contract whose unavoidable costs exceed its expected benefits. That includes contracts with customers. US GAAP has no general equivalent. Losses are accrued only where specific guidance requires it, such as ASC 605-35 for construction-type and production-type contracts. Example: a fixed-price service contract brings in $1,000,000 and has unavoidable costs of $1,150,000. An IFRS reporter recognizes a $150,000 provision when the contract becomes onerous. A US GAAP reporter with no specific loss guidance recognizes the loss as the costs are incurred.
10. Disclosures: interim reports and private companies
These do not change measurement, but they change how much work the notes take.
- Interim reports: IAS 34.16A(l) requires only disaggregated revenue. Under US GAAP, ASC 270 as amended by ASU 2014-09 requires public business entities to also give contract balance and remaining performance obligation disclosures each quarter.
- Private companies: ASC 606 lets entities other than public business entities omit or simplify several disclosures, including the quantitative disaggregation of revenue. Full IFRS 15 has no such relief. The only route to lighter requirements under IFRS is the separate IFRS for SMEs Accounting Standard.
What's the same
Everything else, which is most of the standard. Both use the five steps listed in ASC 606-10-05-4 and IFRS 15.IN7:
- Identify the contract.
- Identify the performance obligations.
- Determine the transaction price.
- Allocate it on relative standalone selling prices.
- Recognize revenue when or as control transfers.
The core judgments read the same in both. That includes the variable consideration constraint, the over-time criteria, material rights, principal versus agent, and the one-year practical expedient for commissions. The topics below have their own worked guides on this site. Every one applies equally under IFRS 15:
- contract modifications: separate contract, termination or catch-up
- the residual approach to standalone selling price
- the "simultaneously receives and consumes" over-time test
- nonrefundable upfront fees and material rights
Test yourself
To check you can apply these differences under exam conditions, start with the US GAAP vs IFRS differences quiz. Then drill each framework on its own with the ASC 606 revenue recognition questions and the IFRS 15 and IFRS 16 questions, which include collectability, noncash consideration and licensing scenarios. Every standard these questions cite is listed in the ASC and IFRS standards citation index.
This page is educational material for exam practice and general understanding, not professional accounting advice. Engage a qualified accountant for real transactions. The percentages quoted for "probable" are firm interpretations, not figures in either standard.
Source: FASB ASC 606 (ASU 2014-09, as amended by ASU 2016-10, ASU 2016-12 and ASU 2019-08), ASC 340-40, ASC 805-20-30-28 (ASU 2021-08), ASC 270; IFRS 15 as amended by Clarifications to IFRS 15 (April 2016), IFRS 3, IAS 34, IAS 37; Deloitte, A Roadmap to Comparing IFRS Standards and U.S. GAAP, section 3.1; PwC, IFRS and US GAAP: similarities and differences, chapter 3; KPMG, IFRS vs US GAAP: revenue (2022).