Section 6100: Revenue
International Accounting Standard 18
Revenue
1. First version of IAS 18
"Revenue recognition" issued in December 1982
2. Revisions
December 1993, Revenue
[U.S. GAAP Codification Topic]
605 Revenue recognition
605-10 Overall
605-15 Products
605-20 Services
605-25 Multiple-element arrangements
[SEC Rules]
SEC Staff Accounting Bulletin Topic 13
3. Revenue is gross inflow of economic benefits
Such economic benefits
are from ordinary activities
and result in increase in equity
4. Increase in equity due to the following is not revenue
--> contributions from equity participants
5. Measurement of revenue
Revenue is measured at the fair value of (1)
(1) the consideration received or receivable
6. If inflow of cash is deferred
(1) fair value of consideration < nominal amount of cash receipts
--> the difference is interest revenue
(2) fair value of consideration = present value of nominal amount of cash receipts
--> imputed rate of interest is used
--> rate for a similar instrument with similar credit rating
7. Sale of goods
For sale of goods transactions
--> revenue is recognised, when all of (1) – (5) conditions are met
(1) risks and rewards of ownership are transferred
(2) neither effective control nor continuing managerial involvement
(3) inflow of economic benefits is probable
(4) reliable measurement of revenue amount
(5) reliable measurement of costs incurred
8. Rendering of services
If outcome of a transaction can be reliably estimated
--> recognise revenue, by reference to the stage of completion, IAS 18.20
Percentage of completion method
If outcome of a transaction cannot be reliably estimated
--> revenue is recognised up to the amount of costs, expected to be recoverable
Since revenue = costs, no profit is recognised, IAS 18.26
9. Interest, royalties, dividends, IAS 18.30
Interest revenue is recognised, using effective interest method
Royalties revenue is recognised. on an accrual basis based on the agreement
Dividends revenue is recognised, when the right to receive dividends is established
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