... earning process in either completed or virtually completed. Second, revenue must be realizable, that is, cash is received or the amount to be received can be measured. Failure to meet one of these criteria results in the deferral of revenue. Judging whether the two criteria are met can be straightforward or present major challenges. For example, retailers recognize revenue at the time of the sale. However, for the service and high-tech industries, establishing when revenue is earned can present difficulties in situations where complex contracts are concluded with customers. Return and upgrade clauses, continuous services, and conditional payments make it difficult to apply realization criteria. There are three methods that are used to help recognize revenue. These methods are the percentage of completion, the completed contract method, and the installment payment method. The percentage of completion method is most common with construction companies, such as those that build bridges ...

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