About This Chapter
Product revenue is earned when the risk and rewards of ownership substantially transfer from the seller to the buyer. This transfer is usually accompanied by the transfer of legal title to the products; so from an accounting and legal perspective, the revenue has been earned on delivery. Companies would use the Completed Performance model for revenue recognition, provided the seller has no continuing involvement with the product. There are, however, issues of continuing involvement, such as rights of return, product warranties, customer acceptance provisions, which can make the accounting more complex.
As discussed in Chapter 1, the four principles of revenue recognition are:
1. Persuasive evidence ...
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