When should revenue be recognised for the sale of pre-paid electricity?

The sale of electricity constitutes a sale of goods. GRAP 9 on Revenue from Exchange Transactions requires entities to recognise the sale of goods when, among other criteria, the entity has transferred to the purchaser the significant risks and rewards of ownership of the goods.

In the case of prepaid electricity, the significant risks and rewards of ownership transfer to the purchaser at the time of consumption of the electricity. The revenue received from prepaid electricity sales is therefore deferred and revenue is recognised as it is consumed by the purchaser.

An entity determines the consumption by using actual consumption information. If this is unavailable, an estimate of consumption may be made. An estimate may be made by, for example, using a trend analysis and other historical data about electricity usage, including how often an electricity card is purchased or additional units of electricity loaded onto a pre-paid card.

Only where an entity demonstrates that it is unable to determine a reliable estimate of electricity consumption after making every reasonable effort to gather appropriate information, may revenue be recognised on a cash basis.
Refer to FAQ 6.7 on when revenue from prepaid electricity sales should be recognised: https://www.asb.co.za/frequently-asked-questions/.