According to the new revenue standard, if the right to payment for performance to date remains enforceable, what happens to the entity’s right to payment?

According to the new revenue standard, if the right to payment for performance to date remains enforceable, what happens to the entity’s right to payment?

• A. The entity would continue to have a right to payment to date if the right to payment for performance to date remains enforceable
• B. The entity loses the right to payment once waived
• C. The contract must be terminated before payment rights adjust
• D. Right to payment is irrelevant to revenue recognition

Answer: (A)

In the new revenue standard, you recognize a receivable when you have an unconditional right to consideration for the goods or services already transferred. If the right to payment for performance to date remains enforceable, it means the entity has an unconditional right to that payment for what has already been performed. That right is recorded as an asset (a receivable) and remains in place until payment is received. The contract does not need to be terminated, and the right to payment is not irrelevant to revenue recognition; it’s what allows you to show that you are entitled to payment for the work completed.

In the new revenue standard, you recognize a receivable when you have an unconditional right to consideration for the goods or services already transferred. If the right to payment for performance to date remains enforceable, it means the entity has an unconditional right to that payment for what has already been performed. That right is recorded as an asset (a receivable) and remains in place until payment is received. The contract does not need to be terminated, and the right to payment is not irrelevant to revenue recognition; it’s what allows you to show that you are entitled to payment for the work completed.