Earned - company has substantially accomplished what it must do to be entitled to benefits represented by the revenues.
Realized or realizable - Cash or asset readily convertable to a known amt. of cash, has been rec'd
Revenue Recognition (according to the SEC)
SAB 101: Recognize revenue when all of the following conditions are met:
1)Persuasive evidence of an arrangement exists - elements are finalzied in accordance w/company's normal and customary P&P
2)Delivery has occurred or services have been rendered - Customer assumes the risks and rewards of ownership - even after delivery, rev. shouldn't be recognized if customer acceptance is uncertain
3)Price is fixed or determinable - it is fixed or determinable if it isn't subject to adjustment or refund - if a fee is not fixed or determinable, revenue is recognized as payments from customers become due
4)Collectibility is reasonably assured - Customer must be able & expected to pay the sales price at the time of sale
Ordinarily, revenue should be recognized at the time a transaction is completed w/a provision made for possible uncolectible amts.
If collection is not reasonable assured, revenue should not be recognized - revenue is recognized as payment is rec'd using either the installment (recognize profit proportional to cash rec'd) or cost recovery method (recognize profit only after cost recovered)
arrangements where the seller delivers good but retain title to the goods until they are sold
The consignee acts as an agent for the consignor in selling the merchandise
Products delivered under a consignment arrangement do not qualify for revenue recognition