Review the following note relating to revenue recognition for Siskon Gold Corporation, a company “engaged in the business of exploring, acquiring, developing, and exploiting precious mineral properties, principally gold.”
2. SIGNIFICANT ACCOUNTING POLICIES
Revenue recognition—Revenue from gold production is recognized when the finished product is poured based upon estimated weights and assays at current market prices.
1. What is the critical revenue recognition event for Siskon?
2. Is the company justified in recognizing revenue prior to the point of an actual sale? Why?
3. What potential risks exist when revenue is recognized prior to the point of sale?