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Given that the maintenance contract with the customer involved the rendering of services over a period, the previous policy applied of recognizing revenue
on invoice at the commencement of the contract did not comply with IAS 18. The subsequent change in policy to one which recognized revenue over the
contract term, therefore, was the correction of an error rather than a change in estimate and should have been presented as such in accordance with IAS 8
and been effected retrospectively.
Revenue Recognition and Presentation
Arrangements with multiple deliverables
EXTRACTS FROM PUBLISHED FINANCIAL STATEMENTS
VODAPHONE PLC Annual Report, March 31, 2010
In revenue arrangements including more than one deliverable, the deliverables are assigned to one or more separate units of accounting and the arrangement
consideration is allocated to each unit of accounting based on its relative fair value.
Determining the fair value of each deliverable can require complex estimates due to the nature of the goods and services provided. The Group generally
determines the fair value of individual elements based on prices at which the deliverable is regularly sold on a stand-alone basis after considering volume
discounts where appropriate.
Presentation: gross versus net
When deciding the most appropriate basis for presenting revenue or costs of revenue, both the legal form and substance of the agreement between the Group
and its business partners are reviewed to determine each party’s respective role in the transaction.
Where the Group’s role in a transaction is that of principal, revenue is recognized on a gross basis. This requires revenue to comprise the gross value of the
transaction billed to the customer, after trade discounts, with any related expenditure charged as an operating cost.
Where the Group’s role in a transaction is that of an agent, revenue is recognized on a net basis with revenue representing the margin earned.
Revenue
J. SAINSBURY PLC Financial Statements to March 21, 2009
Revenue consists of sales through retail outlets and excludes Value Added Tax. Sales through retail outlets are shown net of the cost of Nectar reward points
issued and redeemed, staff discounts, vouchers and sales made on an agency basis. Commission income is recognized in revenue based on the terms of the
contract.
Revenue is recognized when the significant risks and rewards of products and services have been passed to the buyer and can be measured reliably.
Interest income is recognized in the income statement for all instruments measured at amortized cost using the effective interest method. This calculation takes
into account interest received or paid, fees and commissions received or paid, that are integral to the yield as well as incremental transaction costs.
Fees and commissions earned by Sainsbury’s Bank, that are not integral to the yield, are recognized in the income statement as the service is provided. Where
there is a risk of potential claw back, an appropriate element of the insurance commission receivable is deferred and amortized over the expected average life of
the underlying loan.
Revenue recognition
UNILEVER Annual Report, 2009
Turnover comprises sales of goods and services after deduction of discounts and sales taxes. It does not include sales between group companies. Discounts
given by Unilever include rebates, price reductions and incentives given to customers, promotional couponing and trade communication costs.