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REVENUE - Coggle Diagram
REVENUE
Types of transactions
Warranties
Option to purchase it separately
Performance obligation
No option to purchase it separately
Required by law
No performance obligation
Accounted for IAS 37 Provisions
Principal vs agent
Principal
Control goods & sevices before being transferred
Recognized rev. in gross amount
Agent
Arrange for provisions of goods & services by another party
Recognized rev. in commission / fee
Repurchase agreement
No control of asset by customer
Type
Forward contract
Obligation
Call option
Right
Entity will account as
Lease (IRFS 16)
Repurchase price < Ori price
Financing arrangement
Repurchase price => Ori price
Recognize
Asset
Financial liability
Cash received
Difference as interest expense
Put option
Outright sale with a right of return
Repurchase price < Original price
Customer unlikely to exercise option
Lease (IFRS 16)
Customer likely to exercise option
Control does not pass to customer
Financing arrangement
Repurchase price => Ori price
Above expected market value
Control does not pass to customer
Consignment agreement
Customer
Dealer
When product is delivered
No control
No rev. is recognized
Indicators
Product is control by entity until sold/ product expires
Entity can require return of product or transfer to others
Dealer has no obligation to pay for the product
Bill & hold arrangement
Goods are sold but remain in the possession of seller
Due to: customer lacks storage facilities
Control has transferred
Custodial service
Criteria
Requested by customer
Separately identified as belonging to customer
Ready for physical transfer to customer
Entity has no ability to use or transfer to others
Revenue from contracts with customers
Core principle
Transfer of control
Direct use of
Obtain substantially all the remaining benefits from the asset
Not transfer of risk & reward
Not passing of legal title
Exceptions
Leases (IFRS 16)
Insurance contract (IFRS 4)
Financial instrument ( IFRS 9,10,11) (IAS 27, 28)
Non-monetary exchanges bet. entities in the same line of business
Revenue recognition
Identify contract with customers
Contract approved
Committed to fulfill terms
Rights can be identified
Clear payment terms
Consideration collected is probable
Contract can be verbal, written, implied
Identify separate performance obligations
Distinct good & services
Distinct functions
Distinct profit margin
Can be sold separately
No significant service of combining it with others
Does not modify/ customize others
Not highly dependent / interrelated with others
Two criteria met
Customer can benefit from it
On its own
With other resources that are readily available to them
Promise to transfer it is identifiable from other promises
Determine transaction price
Variable consideration
Discounts
Trade discount
Rebates
Refunds
Price concessions
Credits
Penalties
Allocate 3 to 2
Items sold separately
In proportion to stand-alone selling price
Items not sold separately
Co. have to estimate its stand-alone price
Recognize rev. when or as performance obligation is satisfied
Control transferred
Over time
Customer simultaneously receives & consumes the benefits as performance takes place
Performance creates/ enhances an asset
Performance does not create alternative assets for the benefits of the entity
Entity is entitled to payment for performance completed to date
At a point in time
Control transferred
Physical possession of asset transferred
Rights to payment
Customer has legal title
Risk & rewards transferred
Contract cost
Incremental cost of obtaining contract
Sales commission
Entity expects to recover
Recognized as an asset
Relate directly to identifiable contract
Labour
Material
Management cost
Cost generate/ enhance resources that will be used in the future
Expected to be recovered
Amortised on a systematic basis consistent to the transfer of goods/services
Cost incurred regardless of whether the contract was obtained
Expensed when incurred
Income
Revenue
Ordinary course
Includes
Sales
Fees
Interest
Dividend
Royalties
Excludes
Taxes collected for 3rd parties
Gains
Presentation & disclosure
Presentation
Customer has paid but goods are not transferred
Contract liability
Customers not yet paid
Contract asset
Entity's rights to consideration is conditional
Future performance
Receivable
Entity's rights to consideration is unconditional
Disclosure
Revenue
Separately
Impairment loss
Contract asset / receivable
Separately
Balance b/d or c/d
Receivable
Contract asset
Contract liability
Performance satisfied over time
SOPL
Loss
Eg. 70% COS
30% Loss
Profit
Normal
SOFP
Contract asset / Amounts due from customer
Receivable
Contract liability