The objective of IAS 18 is to prescribe the accounting treatment for revenue arising from certain types of transactions and events. Show Revenue: the gross inflow of economic benefits (cash, receivables, other assets) arising from the ordinary operating activities of an entity (such as sales of goods, sales of services, interest, royalties, and dividends). [IAS 18.7] Revenue should be measured at the fair value of the consideration received or receivable. [IAS 18.9] An exchange for goods or services of a similar nature and value is not regarded as a transaction that generates revenue. However, exchanges for dissimilar items are regarded as generating revenue. [IAS 18.12] If the inflow of cash or cash equivalents is deferred, the fair value of the consideration receivable is less than the nominal amount of cash and cash equivalents to be received, and discounting is appropriate. This would occur, for instance, if the seller is providing interest-free credit to the buyer or is charging a below-market rate of interest. Interest must be imputed based on market rates. [IAS 18.11] Recognition, as defined in the IASB Framework, means incorporating an item that meets the definition of revenue (above) in the income statement when it meets the following criteria:
IAS 18 provides guidance for recognising the following specific categories of revenue: Sale of goods Revenue arising from the sale of goods should be recognised when all of the following criteria have been satisfied: [IAS 18.14]
Rendering of services For revenue arising from the rendering of services, provided that all of the following criteria are met, revenue should be recognised by reference to the stage of completion of the transaction at the balance sheet date (the percentage-of-completion method): [IAS 18.20]
When the above criteria are not met, revenue arising from the rendering of services should be recognised only to the extent of the expenses recognised that are recoverable (a "cost-recovery approach". [IAS 18.26] Interest, royalties, and dividends For interest, royalties and dividends, provided that it is probable that the economic benefits will flow to the enterprise and the amount of revenue can be measured reliably, revenue should be recognised as follows: [IAS 18.29-30]
Appendix A to IAS 18 provides illustrative examples of how the above principles apply to certain transactions. What is the least likely condition necessary for revenue recognition?which of the following is least likely a condition necessary for revenue recognition? collection of cash is not required to recognize rev.
What are the conditions for revenue to be recognized under IFRS quizlet?What are the conditions for revenue recognition when the right of return exists? The sales price is substantially fixed at the time of sale. The buyer assumes all risks of loss because the goods are considered in the buyer's possession. The buyer has paid some form of consideration.
What are the rules regarding revenue recognition?The revenue recognition principle, a feature of accrual accounting, requires that revenues are recognized on the income statement in the period when realized and earned—not necessarily when cash is received.
What is revenue recognition quizlet?Revenue (GAAP Definition) Increasing an asset or decreasing a liability (or combination of both) by producing or delivering goods, or rendering services that are the entity's ongoing major or central operations. Revenue Recognition (GAAP) Revenue is recognized when it realized or realizable and earned.
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