How does revenue recognition differ between rendering services and selling goods?

Revenue recognition differs between rendering services and selling goods primarily in the nature of the transaction. When rendering services, a company is providing a task or action rather than transferring ownership of a physical product. This means that revenue from services is typically recognized when the service is performed or completed, as that is when the obligation is fulfilled and the customer receives the benefit of the service.

In contrast, selling goods usually involves a transaction where ownership of a physical item is transferred from the seller to the buyer. Revenue from the sale of goods is recognized at the point of delivery, when the risks and rewards of ownership have been transferred, which typically coincides with the consumption of the item by the buyer.

The complexity of recognizing revenue in service transactions can also arise from various types of service engagements, such as contracts that may span multiple periods or be contingent on certain outcomes. However, the key distinction is that rendering services focuses on performance obligations related to the service provided, while selling goods emphasizes the transfer of ownership of tangible products.