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

IFRS FOR SMES – JULY 2009Example 3 Goods shipped subject to conditions: on approval whenthe buyer has negotiated a limited right of return23A.5 If there is uncertainty about the possibility of return, the seller recognisesrevenue when the shipment has been formally accepted by the buyer or the goodshave been delivered and the time period for rejection has elapsed.Example 4 Goods shipped subject to conditions: consignment salesunder which the recipient (buyer) undertakes to sell the goods onbehalf of the shipper (seller)23A.6 The shipper recognises revenue when the goods are sold by the recipient to a thirdparty.Example 5salesGoods shipped subject to conditions: cash on delivery23A.7 The seller recognises revenue when delivery is made and cash is received by theseller or its agent.Example 6 Layaway sales under which the goods are delivered onlywhen the buyer makes the final payment in a series of instalments23A.8 The seller recognises revenue from such sales when the goods are delivered.However, when experience indicates that most such sales are consummated,revenue may be recognised when a significant deposit is received, provided thegoods are on hand, identified and ready for delivery to the buyer.Example 7 Orders when payment (or partial payment) is received inadvance of delivery for goods not currently held in inventory, forexample, the goods are still to be manufactured or will be delivereddirect to the buyer from a third party23A.9 The seller recognises revenue when the goods are delivered to the buyer.Example 8 Sale and repurchase agreements (other than swaptransactions) under which the seller concurrently agrees torepurchase the same goods at a later date, or when the seller has acall option to repurchase, or the buyer has a put option to require therepurchase, by the seller, of the goods23A.10 For a sale and repurchase agreement on an asset other than a financial asset, theseller must analyse the terms of the agreement to ascertain whether, insubstance, the risks and rewards of ownership have been transferred to the buyer.If they have been transferred, the seller recognises revenue. When the seller hasretained the risks and rewards of ownership, even though legal title has beentransferred, the transaction is a financing arrangement and does not give rise torevenue. For a sale and repurchase agreement on a financial asset, thederecognition provisions of Section 11 apply.© IASCF 143