---
sidebar_position: 1
title: ASC 606 5-Step Engine Overview
description: How GAAPx automates the 5-step ASC 606 / IFRS 15 revenue recognition model for complex B2B SaaS and hybrid contracts.
keywords:
  - ASC 606 engine
  - IFRS 15 revenue recognition
  - 5 step model
  - revenue subledger
---

# ASC 606 5-Step Engine Overview

**The GAAPx ASC 606 Engine** is a deterministic technical accounting platform that automates the entire 5-step revenue recognition framework under ASC 606 and IFRS 15. Built as a specialized subsidiary ledger on Revenue Cloud principles, GAAPx guarantees compliance, auditability, and mathematical precision for Big 4 audit readiness.

```mermaid
flowchart LR
  Step1["Step 1:\nIdentify Contract"] --> Step2["Step 2:\nIdentify POBs"]
  Step2 --> Step3["Step 3:\nDetermine Price"]
  Step3 --> Step4["Step 4:\nAllocate SSP"]
  Step4 --> Step5["Step 5:\nRecognize Revenue"]
```

---

## The 5-Step Framework Implementation

### Step 1: Identify the Contract with a Customer (ASC 606-10-25)
GAAPx verifies commercial substance, enforceable rights, payment terms, and collectibility thresholds prior to schedule activation.

### Step 2: Identify Performance Obligations (ASC 606-10-25-14)
Contracts are decomposed into distinct promises: subscription platform access, professional implementation, premium support tiers, and consumption overages.

### Step 3: Determine the Transaction Price (ASC 606-10-32)
Calculates total consideration, accounting for fixed fees, variable usage caps, milestone incentives, and non-refundable upfront fees.

### Step 4: Allocate Transaction Price to POBs (ASC 606-10-32-28)
Applies the relative **Standalone Selling Price (SSP)** method across all distinct performance obligations to prevent revenue distortion.

### Step 5: Recognize Revenue as POBs are Satisfied (ASC 606-10-25-23)
* **Over Time**: Ratable daily/monthly recognition for continuous subscription access.
* **Point in Time**: Milestone sign-off or delivery completion for implementation and perpetual components.

:::info SCREENSHOT PLACEHOLDER: 5-Step Audit Matrix
**Location in App**: `App > Revenue > [Contract ID] > ASC 606 Audit Matrix`  
**Visual Description**: Interactive compliance matrix showing the 5-step evaluation results, SSP carve-out table, and direct link to source contract clauses.  
**Recommended Dimensions**: `1200 x 675`  
:::