How is control defined in the context of revenue recognition?

Control, in the context of revenue recognition, refers to the ability of an entity to direct the use of an asset and obtain the benefits that flow from it. This concept is foundational in determining when and how revenue should be recognized under the revenue recognition principle, particularly in accordance with Accounting Standards Codification (ASC) 606.

When an entity has control over an asset, it means that it has the right to make decisions about the asset's use and the benefits that come from that asset (which could be in the form of cash flows, access to products, etc.). In terms of revenue recognition, control is a key indicator of whether a company has satisfied a performance obligation and can therefore recognize revenue.

In contrast, options that refer to selling at market price, recording a transaction, or the process of delivering goods do not encapsulate the broader concept of control as it pertains to revenue recognition. Those aspects deal with specific operational or timing elements rather than the overarching right to direct and benefit from goods or services. This is why the definition focusing on the right to direct the use of goods or receive benefits accurately captures the essence of control in revenue recognition.