Revenue recognition methods
The Board continued its discussion from the February meeting about two revenue recognition methods.
Under the first method, revenue is recognised when the obligation to provide goods, services or other rights is extinguished. This is deemed to be when the customer obtains the right to use or benefit from the goods, services or other rights.
Under the second method, revenue is recognised as the entity�s production process creates or enhances assets for customers, which is when the entity carries out acts to fulfil its contractual obligations to provide goods, services or other rights to the customer.
The Board discussed whether under the first method an obligation could be partially extinguished and, hence, revenue recognised before (say) delivery of a good constructed under a long-term contract. For example, the Board considered whether acceptance by a customer at various predetermined intermediate completion points should result in recognition ofrevenue.
The Board reached no conclusions. It directed the staff to explore further whether the two recognition methods could be bridged and will discuss the issue again at its joint meeting with the FASB in April.