In the case of export of goods, the recognition of revenue follows certain principles and guidelines outlined in accounting standards. Revenue from export sales is typically recognized when the following criteria are met:
1. Identification of the contract: The existence of a legally enforceable contract between the exporter and the customer is essential. The contract should outline the terms and conditions of the sale, including the specific goods to be delivered, the price, and any additional obligations.
2. Transfer of control: Revenue recognition is generally tied to the transfer of control over the goods to the customer. Control refers to the ability of the customer to direct the use and obtain the benefits of the goods.
3. Determination of the transaction price: The transaction price should be determined, which is the amount expected to be received from the customer in exchange for the goods. This may involve considering factors such as discounts, rebates, or any other adjustments that may impact the final amount.
4. Collection probability: There should be a reasonable assurance of the collection of payment from the customer. This involves assessing the creditworthiness of the customer and considering any potential risks associated with the collection process.
Once these criteria are met, revenue from export sales can be recognized. It is important to adhere to the applicable accounting standards and industry-specific guidelines to ensure accurate and compliant revenue recognition practices.
Note: You can also give the answer based on Ind AS 115 Five Step Model
