The presence of variable pricing created by expected refunds, rebates, credits or tiered pricing generally precludes use of the as-invoiced practical expedient. This is because the amount to which the customer has a right to invoice will not, at least until the customer achieves the lowest pricing tier, reflect the amount to which the entity expects to be entitled. The entity also cannot recognize the invoiced amount as revenue when there is an expectation of later price concessions. This expectation also means the invoiced amounts do not reflect the value to the customer of the services provided. [606-10-55-18] Question 7.4.100 Does the as-invoiced practical expedient permit an entity to wait until it issues an invoice to the customer to recognize revenue? Interpretive response: No. If an entity is using the as-invoiced practical expedient as a measure of progress it recognizes revenue in a pattern that depicts rights the entity accrues based on its performance. If contractually, it has the right to invoice but does not issue the invoice under the terms of the contract until a later date, the entity still recognizes revenue for performance on an accrual basis. For example, an entity enters into a contract with a customer on a time and materials basis, but only bills the customer on a quarterly basis. In that scenario, when applying the as-invoiced practical expedient, the entity would recognize revenue as the time and materials are incurred rather than on a quarterly basis. Question 7.4.110 Can the as-invoiced practical expedient be applied to performance obligations satisfied at a point in time? Interpretive response: No. The as-invoiced practical expedient is a practical expedient for measuring progress toward complete satisfaction of a performance obligation satisfied over time. If a performance obligation is satisfied at a point in time, no measure of progress is necessary. However, the practical expedient could potentially be applied to a combined performance obligation that includes a good or service that would normally be satisfied at a point in time if that good or service was a separate performance obligation. For example, a contract to significantly customize or modify equipment is satisfied over time when the entity charges on a time and materials basis.
Revenue recognition 450 7. Step 5: Recognize revenue when (or as) the entity satisfies a performance obligation © 2017 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative, a Swiss entity. All rights reserved. 7.5 Performance obligations satisfied at a point in time Excerpt from Subtopic 606-10 >> Performance Obligations Satisfied at a Point in Time 25-30 If a performance obligation is not satisfied over time in accordance with paragraphs 606-10-25-27 through 25-29, an entity satisfies the performance obligation at a point in time. To determine the point in time at which a customer obtains control of a promised asset and the entity satisfies a
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