Revenue recognized over time

Over-time revenue means that control transfers as the entity performs. It does not mean that the contract lasts for several periods or that costs have been incurred. First establish at least one criterion in ASC 606-10-25-27:

1. The customer receives and consumes the benefit as the entity performs.
2. Performance creates or enhances an asset that the customer controls while it is created or enhanced.
3. The asset has no alternative use to the entity, and the entity has an enforceable right to payment for performance completed to date.

The third path needs both conditions. Alternative use considers contractual and practical limits on redirecting the asset. Make that assessment at contract inception and update it only after a qualifying modification changes the performance obligation. ASC 606-10-25-28 governs that assessment.

The payment right must compensate performance completed to date if the customer terminates for a reason other than the entity's failure. A deposit or progress billing does not establish that right. Contract terms and applicable law both matter under ASC 606-10-25-29. If none of the three criteria applies, use the point-in-time control path.

Only after proving an over-time path should the entity select a measure of progress. Study the Harbor fabrication example, then complete the independent progress practice.