I have a doubt reg AS9. Suppose you have a software company XYZ Ltd. It earns revenue from 3 modes -Time and Material, Fixed Billing and Project Mile stones. For T&M (Time and Material) contracts, revenue recognition is relatively easy wherein the manhours and the agreed rates are applied to record monthly revenues.For fixed Contracts, revenue is recorded on completion of the project. For milestone project, it is a settled position that you have to estimate revenue and based on accrual concept record income.
I am slightly confused on revenue recogn for milestone projects . I can argue that the right to receive revenue (which is the basis upon which AS9 is built) is not established bcos unless the client gives a sign off , I dont know whether I have earned the revenue. Also as per principle of conservatism, I am understating the Income.Can someone throw some light on this?
CAclubindia
