Abstract:
Today, the corporate sector is well established in producing and delivering
different types of products and services in each industry. Nowadays, entities
highly engage into agency transactions related to revenue. Realistically, it is very
challenging concept to determine when and whether to recognize the revenue
in the financial statements or not.
SB Limited is a prominent building construction company in Sri Lanka. It is
engaged with contractual agreements with customers as well as with
subcontractors. As to the customers’ requirements, SB Limited designs the
building and the interior settings. During the process of construction, SB Limited
hires DP Limited to fabricate the interior settings for the designed building by
engaging into the legal contract called as “Letter of Award” which demonstrates
that “DP Limited satisfies the finishing performance obligation of the project on
behalf of SB Limited by receiving a fixed rate of commission on the total contract
value.”
