Step 5: Recognize Revenue
When Is Revenue Recognized?
Revenue is recognized when a performance obligation is satisfied by transferring control of a good or service to the customer. This may occur at a point in time or over time.
- Customer receives benefits as work is performed.
- Customer controls the asset as it is created.
- Asset has no alternative use and payment is enforceable.
Note
If none of the over-time criteria are met, revenue is recognized at a point in time.
Summary
Revenue is recognized when control transfers, either continuously over time or at a single point in time.