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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
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.
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