Right to Invoice (Practical Expedient)
The right to invoice practical expedient allows a company to recognize revenue in the amount it has a right to invoice, if that amount corresponds directly to the value of the company's performance completed to date.
Billing
Explanation
The expedient applies to performance obligations satisfied over time when the measure of progress is based on output. Typical examples:
• services billed at a fixed hourly rate for hours worked,
• usage-based fees where the price per unit reflects the value delivered,
• periodic services billed at a constant rate.
When the expedient applies, revenue can follow invoicing, and certain disclosures about remaining performance obligations may be simplified.
The expedient generally does not apply if, for example, rates change in a way that does not reflect the value to the customer, or if significant upfront fees, rebates, or volume tiers break the direct link between invoiced amounts and value delivered.
Why It Matters
Where it applies, the expedient can significantly simplify revenue accounting for service and usage-based businesses. Whether it applies is an accounting judgment that should be documented, especially when pricing includes tiers, minimums, or discounts.
Related Terms
Usage-Based Billing · Variable Consideration · Tiered Pricing · ASC 606 · IFRS 15 · Practical Expedient
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