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5. Revenue recognition
Accounting standards
IAS
IAS
IAS
IAS
IAS
11
17
18
24
32
Diagram
Off
balance
sheet
finance
To keep
gearing
low
The purpose
of off balance
sheet finance
To stay with
the terms of
loan covenants
Sale and
purchase
agreements
Common
forms of
off balance
sheet
finance
Factoring of
receivables
Sale and
leaseback
agreements
Factoring
of debts
Revenue recognition
Introduction
Revenue recognition
Revenue from specific types
of transaction or events
IAS 18
Sale of
goods
Rendering
of services
Interests ,
royalties
and dividends
Revenue recognition
Sale of goods
Revenue from the sale of the goods should only be
recognized when all the following are satisfied:
(a) The entity has transferred the significant risks and
rewards of ownership of the goods to the buyer
(b) The entity has no continuing managerial involvement to
the degree usually associated with ownership ,and no
longer has effective control over the goods sold
(c) The amount of revenue can be measured reliably
dIt is probable that the economic benefits associated
with transaction will flow to the entity
(f) The costs incurred in respect of transaction can be
measured reliably
Revenue recognition
Rendering of services
(a)
(b)
(c)
(d)
Revenue recognition
Interest , royalty and dividends
The revenue is recognized on the following bases
aInterest is recognized on a time proportion
basis that take into account the effective yield on
the asset
(b) Royalties are recognized on an accrual basis in
accordance with the substance of relevant
agreement
(c) Dividends are recognized when the share
holders right to receive payment established
Disclosure
The following items should be disclosed.
(a) The accounting polices adopted for the recognition of
revenue, including the methods used t determine the
stage of completion of transactions involving the
rendering of services
(b) The amount of each significant category of revenue
recognized during the period including revenue arising
from:
(i) The sale of goods
(ii) The rendering of service
(iii) Interest
(iv) Royalties
(v) Dividends
(c) The amount of revenue arising from exchange of
goods or services included in each significant category of
revenue
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