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AS – 9
REVENUE RECOGNITION
Objective: Recognizing
revenue arising in the course of the ordinary activities of the
enterprise
Scope: It covers
the following activities: 1. The sale
of goods. 2. The
rendering of services. 3. The use
by others of enterprise resources yielding interest, royalties
and dividends. Revenue recognition in the case of sale
of goods:
CONDITIONS:
a. The property of goods is transferred for a
price.
b. All significant risks and rewards have been
transferred and no effective control is retained.
c. Revenue should not be recognised if
significant uncertainty exists regarding amount of consideration
d. It is reasonable to expect ultimate
collection of consideration. Revenue recognition in case of rendering
of services:
CONDITIONS:
a. Service is recognised either on completed
service or proportionate completion method.
b. Revenue should not be recognised if
significant uncertainty exists regarding amount of
consideration.
c. It is reasonable to expect ultimate
collection of consideration.
Revenue
recognition if the use by
others of enterprise resources
yielding interest, royalties and dividends:
Interest: Revenue
is recognized on the time basis determined by the amount
outstanding and the rate applicable.
Royalty: Revenue
is recognized in accordance with the terms of the relevant
agreement.
Dividends:
Revenue is recognized only when a
right to receive payment is established.
Disclosure requirements: When
recognition of revenue is postponed due to the effect of
uncertainties, an enterprise
should disclose the circumstances in which revenue recognition
has been postponed. |
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