ASC 606 replaced most industry-specific revenue rules, including the old construction guidance, with a five-step model: identify the contract, identify the performance obligations, determine the transaction price, allocate it, and recognize revenue as each obligation is satisfied. Most construction contracts are a single performance obligation recognized over time, because the owner controls the work as it’s built (ASC 606-10-25-27). Progress is usually measured by cost-to-cost.
Some pieces of the old guidance survive: the requirement to recognize an anticipated contract loss immediately sits in ASC 605-35.
Why it matters
It drives what you report as revenue each month, what a surety sees as under- and overbillings, and how change orders, claims and incentives enter the numbers.
Worked example
Riverside (sample data): cost to date $31.7M of an estimated $43.68M is 72.6% complete; 72.6% of the $49.3M contract is $35.78M of earned revenue, though only $33.0M has been billed.
Common mistakes
- Including unapproved change orders in the contract price without applying the constraint.
- Measuring progress with costs that don’t reflect progress, such as uninstalled materials.
How os.construction handles it
The accounting preview has a tested ASC 606 cost-to-cost calculator, but no WIP schedule or revenue-recognition posting yet; recognize revenue under your own policy with journal entries. See Job cost and WIP.