Revenue, being these inflows of enhancements or settlements are what constitutes the major ongoing operations of a company. They allow for the central operations to continue. And as we continue moving forward, we will need to know “when” to recognize revenue and “how much” of it we need to recognize.
Revenue is set to be recognized over a period of time if a customer will CONSUME the benefits from the transaction, CONTROL the asset, or asset has no ALTERNATIVE use and the seller has the legal right to receive payment. And if revenue cannot be recognized over a period of time, it is then to be at a point in time, where the performance obligation is set to be completely satisfied. That is step 2.