Revenue Recognition

Satisfaction of Performance Obligations

The final phase of analysis for companies in recognizing revenue takes place when the company satisfies the promises it made to buyers and extinguishes its obligations to customers. Revenue recognition then occurs what the performance obligation the seller has contracted with the buyer to perform is satisfied. The proposed revenue model in regard to obligations being satisfied by the seller is a control model. The obligation to the buyer is extinguished (and revenue is recognized) when the customer takes control of the asset. Control is defined as “the ability of the customer to direct the use of the asset and obtain substantially all of the remaining benefits from the asset.” Companies then will satisfy ...