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Revenue Recognition

Standard does not deal with revenue recognition aspects of revenue arising from construction contracts, hire-purchase and lease agreements, government grants and other similar subsidies and revenue of insurance companies from insurance contracts. Special considerations apply to these cases.

Revenue from sales and services should be recognized at the time of sale of goods or rendering of services if collection is reasonably certain; i.e., when risks and rewards of ownership are transferred to the buyer and when effective control of the seller as the owner is lost.

In case of rendering of services, revenue must be recognized either on completed service method or proportionate completion method by relating the revenue with work accomplished and certainty of consideration receivable.

Interest is recognised on time basis, royalties on accrual and dividend when owners right to receive payment is established. Disclose circumstances in which revenue recognition has been postponed pending significant uncertainties.

Also refer ASI 14 (withdrawing GC 3/2002) deals with the manner of disclosure of excise duty in presentation of revenue from sales transactions (turnover)