Revenue recognition - threshold limit

[hubert fernandes]

we are builders and have adapted percentage completion method of revenue recognition as prescribed in AS7.However revenue on sale agreements is recognised only when we reach a threshold limit of 20% vis a vis the estimated cost.I would appreciate if any case laws are referred wherein such threshold limits are allowed for computation of business profits

[Surender Gupta]

In my view any case law on the subject would be based on case to case basis because this issue is an issue of fact and facts may be different in each case. The recognition of revenue as per your agreement to the extent meets the requirements of AS7 or related standard issued by ICAI itself is a satisfactory situation.

AI Summary

Revenue recognition thresholds: contractual limits may be accepted if recognition otherwise satisfies percentage completion accounting standards. Acceptance of a contractual threshold for revenue recognition under the percentage completion method is a facts-based determination; if recognition under the contract conforms with the recognition criteria of AS7 or equivalent ICAI guidance, that treatment is generally satisfactory.