HKAS 18 (SSAP 18 revised by HKAS 39) sets out revenue recognition criteria for transactions including sale of goods and rendering of services. Revenue from sale of goods should be recognised when all of the following criteria have been satisfied: • The enterprise has transferred to the buyer the significant risks and rewards of ownership of the goods;
• The enterprise retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold; • The amount of revenue can be measured reliably;
• It is probable that the economic benefits associated with the transaction will flow to the enterprise; and
• The costs incurred or to be incurred in respect of the transaction can be measured reliably.
When the outcome of a transaction involving the rendering of services can be estimated reliably, revenue associated with the transaction should be recognised by reference to thestage of completion of the transaction at the balance sheet date.
The outcome of a transaction can be estimated reliably when all the following conditions are satisfied: • the amount of revenue can be measured reliably;
• it is probable that the economic benefits associated with the transaction will flow to the enterprise;
• the stage of completion of the transaction at the balance sheet date can be measured reliably; and
• the costs incurred for the transaction and the costs to complete the transaction can be measured reliably.
In a situation where sales and services are bundled into one contract, revenue recognitioncriteria should be applied to the separately identifiable components of each singletransaction in order to reflect the substance of the transaction. In this case, the contract has two separately identifiable components - sale of equipment and provision of services.
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