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Under accrual accounting, is revenue recognized and reported when the goods are shipped to the client or when goods are delivered to the client? Thus, if the year end is say 31.12.2021, you shipped goods in December 2021 but the goods are invoiced and delivered to the client in January 2021. Since under IFRS15, the client had control of the goods in 2022, should the revenue be recognised in 2021 or 2022?
If the revenue should be recognised in 2022, however the inventory was shipped in 2021, should the invenroty still be part of COS and not as closing inventory?
Thank you.
Hi,
It all depends on the terms of the contract and when the customer has the control (risks/rewards) of the goods. It is at that point the revenue will be recognised. If control has not passed over then the inventory will remain in the seller’s books at the reporting date.
Thanks
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