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Definition
Revenue recognition governs the point at which revenue is recorded. Under the accruals concept and FRS 102 / IFRS 15, revenue is recognised as performance obligations are satisfied — often before or after cash changes hands.
In plain terms
Bill a 12-month contract upfront and you cannot count it all as this month’s profit — you recognise it as you deliver. This keeps profit from being flattered by timing.
Why it matters for your company
Correct recognition, using deferred income where needed, gives lenders and HMRC a true profit figure and avoids nasty restatements. See the matching principle.
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Matching principle
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Prudence concept
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