Revenue Recognition

In order to record revenue, there is a specific accounting standard called IAS 18 Revenue Recognition. There is a complete guide as when to record revenue from the sale of goods, rendering of services and the receipt/ collection of royalties, dividends and interest.

Sale of Goods

In order to recognize the revenue from sale of goods, following conditions must be fulfilled:

  1. the significant risk and rewards of the goods have been transferred to the purchaser of the goods,
  2. the amount of revenue can be measured with sufficient reliability,
  3. the seller of the goods does not hold any control over the goods once it is sold,
  4. there is a significant probability that the buyer of the goods will pay for the goods,
  5. the cost of the goods can be measured reliably for the seller.