STEP 5 Recognise revenue when each performance obligation is satisfied

Revenue is recognised when (or as) goods or services are transferred to a customer. A vendor satisfies each of its performance obligations (that is, it fulfils its promises to the customer) by transferring control of the promised good or service underlying that performance obligation to the customer.

In the past requirements for revenue recognition (IAS 18 Revenue) were based around an assessment of whether the risks and rewards of ownership of a good or service had been transferred to a … Continue reading

Right to control the use of the identified asset

A contract conveys the right to control the use of an identified asset for a period of time if, throughout the period of use, the customer has the right to obtain substantially all of the economic benefits from the use of the identified asset and the right to direct the use of the identified asset.

Right to obtain substantially all of the economic benefits from use of the identified asset

Continue reading

Leases – Contract for shirts

The case:

Customer enters into a contract with a manufacturer (Supplier) to purchase a particular type, quality and quantity of shirts for a three-year period. The type, quality and quantity of shirts are specified in the contract.

Supplier has only one factory that can meet the needs of Customer. Supplier is unable to supply the shirts from another factory or source the shirts from a third party supplier. The capacity of the factory exceeds the output for which Customer has

Continue reading

Right to direct the use

A customer has the right to direct the use of an identified asset throughout the period of use only if either:

  1. the customer has the right to direct how and for what purpose the asset is used throughout the period of use (as described in paragraphs B25–B30); or
  2. the relevant decisions about how and for what purpose the asset is used are predetermined and:
    1. the customer has the right to operate the asset (or to direct others to operate the
Continue reading