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Interpret revenue recognition notes BHP is the world’s largest diversified resources company. Its core operations involve production of aluminium, copper, zinc, iron ore, diamonds, oil and gas.
Read the following excerpt from the 2021 annual report of BHP.
Recognition and measurement The Group generates revenue from the production and sale of commodities. Revenue is recognised when or as control of the promised goods or services passes to the customer. In most instances, control passes when the goods are delivered to a destination specified by the customer, typically on board the customer’s appointed vessel. Revenue from the provision of services is recognised over time, but does not represent a significant proportion of total revenue and is aggregated with the respective asset and product revenue for disclosure purposes. The amount of revenue recognised reflects the consideration to which the Group expects to be entitled in exchange for the goods or services.
BHP, Annual Report 2021, p. 139 (https://www.bhp.com/-/media/documents/investors/annual-reports/2021/210914_bhpannualreport2021.pdf)
Explain when BHP recognises revenue in terms that your fellow students will understand.