REVENUE MEASUREMENT IAS IFRS

easurement of Revenue

11.10 An entity measures revenue at the fair value of the consideration received or receivable. When determining fair value, the entity should take into account any trade discounts, settlement discounts, or volume rebates.

11.11 When a transaction is, effectively, a financing arrangement, IAS 18 requires an entity to determine fair value by discounting future cash flows from the transaction using an imputed interest rate. The imputed rate of interest is the more clearly determinable of either the prevailing rate on similar instruments by issuers with similar credit ratings, or the rate that discounts the nominal amount of the instrument to the current cash sales price of the goods or services provided. An entity should recognize the difference between the present value and the nominal amount as interest revenue, in accordance with IAS 39, Financial Instruments: Recognition and Measurement.

Author's Note: The IASB issued IFRS 9, Financial Instruments, in November 2009 and again in October 2010 as a replacement to IAS 39. IFRS 9 is effective for annual periods beginning on or after January 1, 2015. At that time, the reference in IAS 18 to IAS 39 will be replaced by a reference to IFRS 9. The requirement will not change.

11.12 When an entity is the principal in a revenue transaction, it should recognize revenue at the full amount of the consideration received or receivable and also recognize the associated cost of sales. An entity that acts as an agent only recognizes revenue for the amount of the commission or fee received or receivable it will retain from the transaction.

Examples

11.23 See the following table for different transactions and events and the likely timing of revenue recognition for these transactions.

Revenue Transaction	Expected Industry	Timing of Revenue Recognition
Goods shipped subject to a right of return	Manufacturing, Consumer Products	When formally accepted or rejection period has lapsed.
Goods shipped subject to installation and inspection	Manufacturing, Aerospace, Computers	When installation and inspection is complete or on delivery if installation is simple.
Bill and hold—delivery is delayed but buyer takes title and accepts billing		When risk and rewards, control, and probability criteria are met.
Developed customized software	Software Development	Based on stage of completion, may include post-delivery services recognized as delivered.
Services—insurance and commissions	Insurance	Effective the commencement or renewal.
Customer loyalty awards	Airlines, Retail	International Financial Reporting Interpretations Committee 13,Customer Loyalty Programmes.