Question

Pick a Canadian company listed on the Toronto Stock Exchange and find a revenue stream that you can apply the concepts of revenue recognition to the company chosen.

Answer 1

Revenue recognition refers to specific principles and conditions for recognizing the revenue of the organisation provided under GAAPs or IFRS as issued. Following criteria is provided in GAAPs or IFRS for recognizing the revenue:

• All risk and rewards have been transferred from seller to buyer.
• There is no control of seller over the goods sold to buyer.
• There is no uncertainty of collection of consideration.
• The amount of consideration is possible to ascertain or measure.
• The Cost of revenue is also possible to ascertain or measure.

The aforesaid criteria can be classified broadly in three categories like condition of performance, collectability, and measurability. And based on these criteria, an organization recognises the revenue to measure the performance of business.

ENBRIDGE INC. is a Canadian listed company on the Toronto Stock Exchange which deals in a business of Liquids’ Pipelines, Natural Gases’ Pipelines, and business of other Utilities & Power for homes or businesses.

Enbridge Inc. is also following the revenue recognition principles and revenue is divided in various categories like rate-regulated revenue where revenue is recorded when underlying agreement are approved by the regulators after adjusting the prospective discount, non rate-regulated revenue where revenue is recognised when the products have been delivered or services have been rendered.