Performance obligation Satisfied over time Vs satisfied at a Point in time
A performance obligation is said to be satisfied over time, even if one of the following criteria is met:
(i) customer simultaneously receives and consumes the goods/ service provided by the entity.
ie receiving and consuming the output of performance obligation happens as and then.
(ii) the performance obligation results in creation or enhancement of an asset AND it is the customer who controls the asset when it is being created or enhanced by the entity (like construction service) or
(iii) asset created is not of any alternative use to the entity creating it AND the
entity has enforceable right w.r.t payment for the part of the asset/performance created
till date.
Revenue in this case, is recognized over the period of time in which the control over goods or
services gets transferred to the customer.
Conditions for recognizing revenue in case of performance obligations satisfied at a point in time
If none of the conditions of 'performance obligations
satisfied over time' are meet, it would be considered that the performance
obligations are satisfied at a point in time.
In such case, the revenue is
recognised, when/once the control over goods or services transferred to the customer.