Revenue Recognition

Question 1

A construction company recognizes revenue at a point in time. Which of the following is one of the criteria for recognizing revenue at a point in time?

A Simultaneous receipt and consumption of customer benefits as and when the company performs.

B Significant risks and rewards of ownership of the asset are with the customer

C The performance of the entity creates or enhances an asset controlled by the customer.

D The performance of the entity does not create an asset with an alternative use.

Answer 1

Significant risks and rewards of ownership of the asset are with the customer

Significant risks and rewards of ownership of the asset are with the customer.

All other options are the criteria for revenue to be recognized over time.

To recognize revenue at a point in time, the following criteria must be met:

• Entity currently has a right to collect payment for the asset
• The legal title for the asset is with the customer
• Physical possession of the asset is transferred by the entity to the customer
• Significant risks and rewards of ownership of the asset are with the customer
• Asset has been accepted by the customer