tailieunhanh - Lecture Framework of financial reporting - Lecture 26

The main contents of the chapter consist of the following: IAS 18 revenue, what is revenue? Measurement of revenue, traditional approach to revenue recognition, revenues from the sale of goods, revenue from services,. | Revise lecture 26 1 IAS 18 Revenue 2 What is revenue? Revenue is the gross inflow of economic benefits during the period arising in the course of the ordinary activities of an entity. Revenue is measured by the fair value of the consideration received or receivable 3 Measurement of revenue The term revenue could apply in any of the following situations: The supply of goods on cash or credit sale terms The provision of services on cash or credit terms 4 Measurement of revenue 3. Rent received or receivable from equipment or property hired out 4. Interest or dividends received or receivable on a trade investment 5 Measurement of revenue Revenue should be measured at the fair value of the consideration received or receivable If the sale is a cash sale, then the revenue is the immediate proceeds of sale. Allowance may be made for expected returns. If the sale is a credit sale, . a sale for a claim to cash, then anticipated cash is revenue. Allowance for irrecoverable debts and returns are usually computed as a separate exercise and disclosed separately. 6 Traditional approach to revenue recognition Traditionally, two conditions must be met before revenue can be recognised: The revenue must be earned, . the activities undertaken to create the revenue must be substantially completed. 7 Traditional approach to revenue recognition 2. The revenue must be realised, . an event has occurred which significantly increases the likelihood of conversion into cash. This also means that the revenue must be capable of being verifiably measured. In most cases, realisation is deemed to occur on the date of sale. Thus, the date of the sale transaction is the moment that the revenue is recognised in the financial statements. 8 Revenues from the sale of goods According to IAS 18 Revenue, the following conditions must be satisfied before the revenue from the sale of goods should be recognised: 1. The seller has transferred the significant risks and rewards of ownership to the . | Revise lecture 26 1 IAS 18 Revenue 2 What is revenue? Revenue is the gross inflow of economic benefits during the period arising in the course of the ordinary activities of an entity. Revenue is measured by the fair value of the consideration received or receivable 3 Measurement of revenue The term revenue could apply in any of the following situations: The supply of goods on cash or credit sale terms The provision of services on cash or credit terms 4 Measurement of revenue 3. Rent received or receivable from equipment or property hired out 4. Interest or dividends received or receivable on a trade investment 5 Measurement of revenue Revenue should be measured at the fair value of the consideration received or receivable If the sale is a cash sale, then the revenue is the immediate proceeds of sale. Allowance may be made for expected returns. If the sale is a credit sale, . a sale for a claim to cash, then anticipated cash is revenue. Allowance for irrecoverable debts and returns