Final answer:
The conditions for revenue recognition at completion of production are: production completion of the resource, the resource's ability for alternative use, and a committed buyer with a reliable outcome measurement.
Step-by-step explanation:
The three conditions for revenue recognition at completion of production are as follows:
- The resource must have been produced: This means that the goods or services in question have been fully manufactured or rendered. It is crucial that these are complete and not in an intermediate state of production.
- Alternative use of the resource: For revenue to be recognized at the completion of production, the goods produced must be able to be used to produce other goods and services. This implies that the product is versatile and has utility beyond its initial intended use, making it accessible for sale or exchange.
- The buyer is committed to purchase, and there is a reliable measurement of the outcome of the transaction: Having a committed buyer ensures that the exchange is probable, and when combined with a reliable measure of the transaction's outcome, such as a set price or a quantifiable number of units sold, revenue recognition is justified.
Meeting these conditions allows a company to recognize revenue for goods or services provided, even if the payment is to be received in the future.