Finance
Revenue Recognition for Usage-Based Billing (ASC 606 Explained)
By the Orvlin team · · 8 min read
The five-step model applied to usage
Identify the contract, the performance obligations, the transaction price, allocate it, and recognize revenue as obligations are satisfied — for usage, typically as consumption happens.
Commitments and minimums
Minimum commitments are recognized as usage occurs, with any shortfall true-up recognized when it becomes billable.
Prepaid credits and breakage
Credits are deferred on purchase. Revenue is released on consumption, and expected unused credits (breakage) may be recognized according to your policy.
What your billing system must provide
- Per-period consumption by customer.
- Credit balances and expirations.
- Contract terms linked to invoices.
- An audit trail for adjustments.
Frequently asked questions
- Is this accounting advice?
- No. This is an overview; confirm your policies with your auditors.