International Financial Reporting Standards_guide.pdf

Chapter 23 Revenue (IAS 18) 259
23.4.5 Other revenues are recognized as follows:
■ Royalties are recognized on an accrual basis (substance of the relevant agreements).
■ Dividends are recognized when the right to receive payment is established (which is
normally the “last day to register” for the dividend).
■ Repurchase agreements arise when an entity sells goods and immediately concludes
an agreement to repurchase them at a later date; the substantive effect of the transaction
is negated, and the two transactions are dealt with as one.
■ Sales plus service refers to when the selling price of a product includes an amount for
subsequent servicing, and the service revenue portion is deferred over the period that
the service is performed.
Initial Measurement
23.4.6 Revenue should be measured at the fair value of the consideration received or
receivable:
■ Trade (cash) discounts and volume rebates are deducted to determine fair value. However,
payment discounts are nondeductible.
■ When the inflow of cash is deferred (for example, the provision of interest-free credit),
it effectively constitutes a financing transaction. The imputed rate of interest should
be determined and the present value of the inflows calculated. The difference between
the fair value and nominal amount of the consideration is separately recognized and
disclosed as interest.
■ When goods or services are rendered in exchange for dissimilar goods or services, revenue
is measured at the fair value of the goods or services received. When the fair value
of the goods or services received cannot be measured reliably, the revenue is measured
at the fair value of the goods or services given up.
■ Revenue only includes inflows received by the entity on its own account. Amounts
collected on behalf of third parties are excluded from revenue, for example agency
relationships and certain taxes.
23.4.7 Interest income should be recognized on a time-proportion basis that:
■ takes into account the effective yield on the asset (the effective interest rate method—
see IAS 39); and
■ includes amortization of any discount, premium, transaction costs, or other differences
between initial carrying amount and amount at maturity.
Subsequent Measurement and Special Circumstances
23.4.8 Financial service fees are recognized as follows:
■ Financial service fees that are an integral part of the effective yield on a financial instrument
(such as an equity investment) carried at fair value are recognized immediately
as revenue.
■ Financial service fees that are an integral part of the effective yield on a financial instrument
carried at amortized cost (for example, a loan) are recognized as interest revenue
over the life of the asset as part of the application of the effective interest rate method.
■ Origination fees on creation or acquisition of financial instruments carried at amortized
cost, such as a loan, are deferred and recognized as adjustments to the effective interest
rate.
■ Most commitment fees to originate loans are deferred and recognized as adjustments
to the effective interest rate or recognized as revenue on earlier expiration of the
commitment.