The term revenue recognition after delivery refers to the process of recording revenue after a product or service has been delivered to a customer. The revenue recognition principle states a company can record revenue when they are realized or realizable, and earned. Under certain conditions, a company may choose to defer the recognition of revenue until after cash has been received from a customer.
The FASB Concept Statement No. 5 states that companies cannot recognize revenues as being earned until they are realized or realizable, and the company has substantially completed what it needs to do in order to be entitled to payment. Revenue can be recognized at the point of sale, before, and after delivery, or as part of a special sales transaction.
If the sales price is not reasonably assured after delivery of the product or service to a customer, the company may choose to defer recognizing revenue until cash is received. Generally, there are two accepted methods to account for these transactions: