IFRS 15 vs. ASC 606: Where the Standards Still Differ

ASC 606 and IFRS 15 were developed jointly by the FASB and the IASB. Both are based on the same five-step model, and in most cases they lead to the same result. But they are not identical. Over time, both boards issued amendments and practical expedients that were not fully aligned.

For companies reporting under both frameworks – or with subsidiaries using different standards – these differences matter. They affect accounting policies, parallel ledgers, and system design.

1. Collectibility Threshold

Both standards require that collection of consideration is "probable" for a contract to exist. The word is the same, but the meaning differs:

• IFRS: probable means more likely than not.

• US GAAP: probable means likely to occur – a higher threshold.

In rare cases, a contract can exist under IFRS 15 but not yet under ASC 606.

2. Shipping and Handling

ASC 606 allows an accounting policy election to treat shipping and handling activities that occur after the customer obtains control as a fulfillment cost rather than a separate performance obligation.

IFRS 15 has no such election. Companies must assess whether shipping is a separate performance obligation.

3. Sales Taxes

ASC 606 allows an election to exclude sales and similar taxes collected from customers from the transaction price.

IFRS 15 requires an assessment of whether the company acts as principal or agent for each tax.

4. Immaterial Promises

ASC 606 explicitly permits companies not to assess whether promised goods or services are performance obligations if they are immaterial in the context of the contract.

IFRS 15 does not include this explicit relief, although general materiality considerations apply.

5. Licenses of Intellectual Property

Both standards distinguish between a right to access and a right to use intellectual property, but the approach differs:

• ASC 606 classifies licenses as functional or symbolic IP, based on the nature of the IP.

• IFRS 15 focuses on whether the company's activities significantly affect the IP to which the customer has rights.

There are also differences in the timing of revenue for license renewals: under ASC 606, revenue for a renewal is generally not recognized before the renewal period begins.

6. Non-Cash Consideration

ASC 606 requires non-cash consideration to be measured at contract inception.

IFRS 15 does not specify a measurement date, which can lead to different practices.

7. Impairment of Contract Costs

IFRS 15 requires the reversal of impairment losses on capitalized contract costs if conditions improve.

ASC 606 / ASC 340-40 prohibits such reversals.

8. Disclosures

Both frameworks require disaggregated revenue in interim financial reports. US GAAP goes further for public companies: interim reports must also include information on contract balances and remaining performance obligations. US GAAP also offers specific disclosure relief for non-public entities that has no equivalent under IFRS.

9. Related Guidance Outside the Revenue Standard

Some differences arise from related standards rather than from ASC 606 or IFRS 15 themselves – for example, recent US GAAP updates on consideration payable to a customer in the form of share-based awards. Companies should monitor amendments on both sides.

What This Means for SAP

For companies reporting under both frameworks, these differences have practical consequences:

• Parallel accounting principles: SAP Revenue Accounting and Reporting can process one contract under multiple accounting principles. Differences in performance obligations, transaction price or timing must be reflected in the configuration.

• Policy-driven configuration: Elections such as shipping and handling or sales taxes must be defined per accounting principle before the system is configured.

• Reconciliation: Differences between US GAAP and IFRS results must be explainable and traceable.

• Data requirements: Some differences require additional data, for example on license types or non-cash consideration.

Related Articles

• The 5-Step Model of IFRS 15 / ASC 606 Explained for SAP Teams

• Parallel Ledgers for US GAAP and IFRS Revenue

• SAP RAR vs. Third-Party Revenue Tools: Integrated or Bolt-On?

The Bottom Line

ASC 606 and IFRS 15 share the same foundation, but the details still differ. Companies with dual reporting should document these differences explicitly in their accounting policies and design their SAP solution to handle both frameworks from the start – rather than adjusting results manually at period end.

Reporting revenue under US GAAP and IFRS in SAP? Talk to our experts.