Sunday, December 1, 2013

[IFRS] IAS 18 - Revenue - Part 4: Application of Goods Revenue Recognition Criteria

Application of Revenue Recognition Criteria

Transaction
Risk and Reward transferred
Relinquished managerial involvement
Point at which revenue should be recognized
Amount paid at time of placing order by buyer
N
N
On delivery of goods
Title of goods transferred along with delivery
Y
Y
On delivery of goods
Goods transferred but title retained for credit purpose
Y
Y
On transfer of goods. Credit risk is not significant to ownership
Goods delivered but payment subject to installation and inspection
N
N
When the buyer accepts delivery and installation and inspection is completed
Goods shipped, but acceptance is subject to approval by buyer
N
N
When the buyer formally accepts the shipment
Buyer has limited right of return
N
N
On delivery of goods and time for return lapsed.
Goods shipped on cash on delivery terms
Y
Y
On delivery of goods and cash is received by the seller.
Goods delivered with product performance warranty
Y
Y
On delivery of goods with provision for warranty
Bill and Hold Sales
Y
Y
When buyer takes title and the conditions of bill and hold are met
Layaway Sales
N
N
On delivery of goods
Consignment sales
N
N
After the buyer sells goods to the final customer.
Sale through Agency
N
N
When agent’s right to return goods is relinquished and/or agent has generated third party revenue
Repurchase option
N
N
No sale is recognized as risk and rewards are retained. Revenue is recognized, if seller relinquishes purchase option  
Subscription Sales
Y
Y
In line with the period over which the items are dispatched