Revenue recognition - over time/point in time

Ppenelope5y ago

Hi, I am struggling with the concept of when to recognize revenue - at a point in time vs over a period of time. Over a period of time there are 3 criteria (which only 1 needs to be met) but they are very wordy and I can't really understand what they mean. 1. The customer simultaneously receives & consumes benefits by vendors performance - an example is cleaning contract, surely you get paid as soon as the job is done, so you would recognise this at a point in time? 2. happy with the second point (the vendor creates/enhances an asset 3. the vendor has no alternative use & can demand payment - surely again this would mean you can recognise revenue at a single point in time? Sorry but i am really struggling to understand. Thank you

steveTutor5y ago#1

I think that the words at a point in time v over a period of time cause unnecessary confusion. If I sell you a 12 month warranty contract I will recognised 1/12 of revenue at each of 12 points in time. So I would not worry about the distinction. As long as you are familiar with the 5 steps and apply common sense you will create a sensible answer.