(IFRS) for Small and Medium-sized Entities (SMEs)

IFRS FOR SMES – JULY 2009(b)(c)surveys of work performed.completion of a physical proportion of the service transaction or contractwork.Progress payments and advances received from customers often do not reflect thework performed.23.23 An entity shall recognise costs that relate to future activity on the transaction orcontract, such as for materials or prepayments, as an asset if it is probable that thecosts will be recovered.23.24 An entity shall recognise as an expense immediately any costs whose recovery isnot probable.23.25 When the outcome of a construction contract cannot be estimated reliably:(a)(b)an entity shall recognise revenue only to the extent of contract costsincurred that it is probable will be recoverable, andthe entity shall recognise contract costs as an expense in the period inwhich they are incurred.23.26 When it is probable that total contract costs will exceed total contract revenue on aconstruction contract, the expected loss shall be recognised as an expenseimmediately, with a corresponding provision for an onerous contract (see Section 21).23.27 If the collectibility of an amount already recognised as contract revenue is nolonger probable, the entity shall recognise the uncollectible amount as anexpense rather than as an adjustment of the amount of contract revenue.Interest, royalties and dividends23.28 An entity shall recognise revenue arising from the use by others of entity assetsyielding interest, royalties and dividends on the bases set out in paragraph 23.29when:(a)(b)it is probable that the economic benefits associated with the transactionwill flow to the entity, andthe amount of the revenue can be measured reliably.23.29 An entity shall recognise revenue on the following bases:(a)(b)(c)interest shall be recognised using the effective interest method as describedin paragraphs 11.15–11.20.royalties shall be recognised on an accrual basis in accordance with thesubstance of the relevant agreement.dividends shall be recognised when the shareholder’s right to receivepayment is established.140 © IASCF