Revenue Recognition: US GAAP (ASC 606) vs MFRS 15 in Malaysia
In today’s global business environment, understanding revenue recognition standards is more than just an accounting exercise—it’s a strategic necessity.
For Malaysian businesses, particularly those involved in international trade or partnerships, the ability to navigate both local and foreign accounting standards such as US GAAP (ASC 606) and MFRS 15 is vital.
In this article, we’ll help you break down both standards and understand how they impact Malaysian companies from a practical, compliance, and financial strategy perspective.
For Malaysian businesses, particularly those involved in international trade or partnerships, the ability to navigate both local and foreign accounting standards such as US GAAP (ASC 606) and MFRS 15 is vital.
In this article, we’ll help you break down both standards and understand how they impact Malaysian companies from a practical, compliance, and financial strategy perspective.
What Is Revenue Recognition?
Revenue recognition is the process of recording revenue in your financial statements when it is earned and realisable—not necessarily when cash is received. This principle is crucial for reflecting an accurate financial position and business performance to stakeholders, investors, and regulators.
Both US GAAP (ASC 606) and MFRS 15 follow a five-step revenue recognition model, but the context in which they are applied—especially across different jurisdictions—can result in very different financial outcomes.
Both US GAAP (ASC 606) and MFRS 15 follow a five-step revenue recognition model, but the context in which they are applied—especially across different jurisdictions—can result in very different financial outcomes.
ASC 606: Revenue from Contracts with Customers (US GAAP)
ASC 606 was jointly developed by the Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) to align US and international revenue recognition standards. It replaced over 200 industry-specific revenue rules under previous US GAAP, bringing in a principles-based approach.
The 5-Step Model
- Identify the contract with the customer.
- Identify the performance obligations.
- Determine the transaction price.
- Allocate the transaction price.
- Recognise revenue when or as performance obligations are satisfied.
Key Features of ASC 606
- Applies to all industries, removing prior inconsistencies.
- Strong emphasis on contractual rights and obligations.
- Focus on the transfer of control, not just risks and rewards.
- Requires enhanced disclosures and documentation.
- Detailed guidance for licensing, variable consideration, and non-cash consideration.
Learn more: US GAAP Key Principles
MFRS 15: Revenue from Contracts with Customers (Malaysia)
MFRS 15, adopted by the Malaysian Accounting Standards Board (MASB), is Malaysia’s version of IFRS 15. While the five-step framework is nearly identical to ASC 606, MFRS 15 applies within the Malaysian reporting ecosystem, especially for public listed companies, large private entities, and companies with foreign investors.
MFRS 15 Features
- Requires entities to report revenue in a way that reflects the transfer of goods or services to customers.
- Encourages judgement-based application rather than rigid rules.
- Less detailed prescriptive guidance than ASC 606.
- Allows more flexibility in interpreting certain contract terms.
Explore: Accounting Services Malaysia
ASC 606 vs MFRS 15: What’s the Difference?
Despite sharing the same foundation, key differences emerge in practical application, disclosure requirements, and interpretation.
| Element | ASC 606 (US GAAP) | MFRS 15 (Malaysia/IFRS-aligned) |
|---|---|---|
| Contract Costs | Highly prescriptive (ASC 340-40) | Principles-based, fewer examples |
| Licensing Revenue | Differentiates symbolic vs functional licenses | Based on control transfer concepts |
| Impairment | Contract asset level | Asset-specific level |
| Collectability Threshold | Higher threshold; contract invalid if collectability is uncertain | Slightly more lenient |
| Disclosures | Extensive disclosures required for public entities | Less detailed but still comprehensive |
| Transition Guidance | Retrospective and modified retrospective | Similar, but slightly less rigid |
For Malaysian businesses operating globally, this means different interpretations of the same contract can lead to different revenue outcomes.
Compare:
US GAAP vs Tax Accounting Differences
US GAAP vs IFRS Differences
Compare:
US GAAP vs Tax Accounting Differences
US GAAP vs IFRS Differences
Why It Matters to Malaysian Businesses
The differences between ASC 606 and MFRS 15 are not merely academic—they have real financial implications.
Scenarios Where US GAAP May Be Required:
- Subsidiary of a US-based company.
- Intending to raise capital in the United States.
- Participating in joint ventures with US firms.
- Offering cross-border SaaS, licensing, or service contracts.
In such cases, compliance with ASC 606 may be mandatory, and a dual reporting framework may be necessary.
Preparing US GAAP Financials for Malaysian Startups
Preparing US GAAP Financials for Malaysian Startups
Impact on Business Strategy
Understanding revenue recognition helps businesses make informed decisions, such as:
- Structuring contracts for favourable outcomes
- Planning for tax liabilities
- Meeting stakeholder expectations
- Improving investor transparency and audit readiness
For example, a business that bundles products and services may face different timing of revenue recognition under each standard. Choosing the right approach helps optimise both cash flow planning and performance reporting.
Which Standard Should You Use?
| Business Situation | Recommended Standard |
|---|---|
| Operating only in Malaysia | MFRS 15 |
| US investors or shareholders | ASC 606 |
| IPO planned in the US | ASC 606 |
| Existing under IFRS/MFRS regime | MFRS 15 |
| Cross-border eCommerce / SaaS | May require dual compliance |
Common Mistakes to Avoid
- Overlooking disclosure requirements under ASC 606.
- Misinterpreting bundled services as single obligations.
- Failing to update accounting systems and software to reflect the new rules.
- Ignoring the impact on internal controls, reporting cycles, and tax planning.
- Not training internal teams on revenue recognition nuances.
Partnering with an experienced advisor can help ensure compliance and avoid costly errors.
Contact Us for Advisory
Contact Us for Advisory
Final Thoughts
Revenue recognition standards continue to evolve, and understanding their implications is vital—especially if your business interacts with global clients or investors. While ASC 606 and MFRS 15 are built on similar principles, their differences can significantly affect when and how revenue is recognised.
At ShineWing TY Teoh, we help Malaysian businesses stay compliant, transparent, and audit-ready, whether you’re working with MFRS, IFRS, or US GAAP.
Ready to explore how revenue recognition impacts your business?
Visit shinewingtyteoh.com or Contact Us today.
At ShineWing TY Teoh, we help Malaysian businesses stay compliant, transparent, and audit-ready, whether you’re working with MFRS, IFRS, or US GAAP.
Ready to explore how revenue recognition impacts your business?
Visit shinewingtyteoh.com or Contact Us today.
