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Revenue recognition - television serial production house
My client is a production house wherein they produce the content of television show for Doordarshan and submit it with invoice charging Rs. X amount per episode wise. Doordarshan in return releases Sanction order stating the episodes content have been approved with deductions (penalty) for difference in duration. Now my question is when should the revenue be recognised, when the client raises the bill upon completion of production of content ? or when the episodes are sanctioned ? or when the episodes are actually telecasted.
Pls Advice?
Replies (1)
In my opinion, as the penalty is direclty linked, it would be better to recognise the entire revenue on the date of Raising Invoice. However the penalty related to the programme can be measured by your client as the length of the programme is available with your client. Hence if such programme is in voilation to the normal accepted Length, Provsion for Loss on Revenue "ie Penalty" should be recognised on Accrual Basis. And on actual realisation, it should be adjusted with the provisons.
By,
Akhil N S,
CA Final Student
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