Revenue Recognition

Delivery

The delivery criterion is met when the seller performs his or her obligations under the contract (explicit or implied). In determining revenue recognition, we need to make a distinction between delivery of products and delivery of services. Accountants generally use a separate model for ­products and services when recognizing revenue. For products, ­accountants generally use the Completed Performance model because value is delivered to the buyer when the products are delivered. (See Chapter 3: Product Revenue, which discusses this concept in detail.)

For services, the Proportional Performance model is generally used because the buyer is receiving value as each component of the service is being performed by the seller. For example, when ...