Page 97 - IC26 LIFE INSURANCE FINANCE

ACCOUNTING STANDARDS - 09

REVENUE RECOGNITION

Revenue is the gross inflow of cash, receivables or other consideration arising in the course of the ordinary

activities of an enterprise from the sale of goods, from the rendering of services, and from the use by others

of enterprise resources yielding interest, royalties and dividends.

Revenue Includes:

 Proceeds from sale of goods

 Proceeds from rendering of services

 Interest, royalty and dividends.

Sale of goods

 Revenue from sales should be recognized when

 All significant risks and rewards of ownership have been transferred to the buyer from the seller.

 Ultimate reliability of receipt is reasonably certain.

Rendering of Services

Revenue from service transactions is usually recognized as the service is performed, either by proportionate

completion method or by the completed service contract method.

Proportionate Completion Method – This is a method of accounting, which recognises revenue in the

statement of profit and loss proportionately with degree of completion of services under a contract.

Revenue is recognised by reference to the performance of each act.

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