As noted in our prior blog post, new revenue recognition standards were issued in 2014. The fifth and final step of the new revenue recognition standard is to recognize revenue when (or as) the entity satisfies a performance obligation. An organization satisfies a performance obligation by transferring control of a promised good or service to the customer. The transfer can occur over time or at a point in time. A performance obligation is satisfied at a point in time unless it meets one of the following criteria, in which case it is satisfied over time:
Assessing whether each criterion is met will likely require significant judgment.
Read other articles in our “Revenue Recognition” Series: