Topic 13: Revenue Recognition Deloitte Accounting Research Tool • Phân bón & Thuốc BVTV Đức Thành

Topic 13: Revenue Recognition Deloitte Accounting Research Tool


It has been, in accordance with IFRS 15.35, that the customer simultaneously consumes and receives the benefits provided by the performance of the installation. As a result, transfer of control takes place over the period of installation from delivery through customer acceptance, measured on a straight-line basis, as our performance is satisfied evenly over this period of time. Rather, the seller’s refund obligation is relieved only upon refunding the cash or expiration of the refund privilege. The staff presumes that such contractual customer acceptance provisions are substantive, bargained-for terms of an arrangement. Accordingly, when such contractual customer acceptance provisions exist, the staff generally believes that the seller should not recognize revenue until customer acceptance occurs or the acceptance provisions lapse. IFRS 15 specifies how and when an IFRS reporter will recognise revenue as well as requiring such entities to provide users of financial statements with more informative, relevant disclosures.

Bill and hold Bill And Hold Agreement Example s have occasionally been abused by businesses to make it appear as though they had higher sales than they did for a given quarter or year. Game Maker enters into a contract during 20X1 to supply 100,000 video game consoles to Retailer.

> 1. Revenue recognition — general

The accounting literature on revenue recognition includes both broad conceptual discussions as well as certain industry-specific guidance.1 If a transaction is within the scope of specific authoritative literature that provides revenue recognition guidance, that literature should be applied. Under a bill-and-hold transaction, the timing of the transfer of control of purchased goods to the customer is one of the critical questions for determining when a company should recognize revenue. Drill Co requests the arrangement be on a bill-and-hold basis because of the frequent changes to the timeline for developing remote gas fields and the long lead times needed for delivery of the drilling equipment and supplies. Steel Producer has a history of bill-and-hold transactions with Drill Co and has established standard terms for such arrangements.

What is the journal entry for bill and hold?

Understanding Bill-and-Hold Arrangement

The issue lies in the first set of journal entries – debiting accounts receivable and crediting revenue. These two journal entries convey that the seller recognized revenue without receiving payment (i.e., cash).

Historical experience with the same specifications and functionality of a particular machine that demonstrates that the equipment meets the customer’s specifications also may provide sufficient evidence that the currently shipped equipment satisfies the customer-specific acceptance provisions. Steel Producer should recognize revenue when the pipe is placed into its warehouse because control of the pipe has transferred to Drill Co. Steel Producer should also evaluate whether a portion of the transaction price should be allocated to the custodial services . Where the entity has performed by transferring a good or service to the customer and the customer has not yet paid the related consideration, a contract asset or a receivable is presented in the statement of financial position, depending on the nature of the entity’s right to consideration. A contract asset is recognised when the entity’s right to consideration is conditional on something other than the passage of time, for example future performance of the entity. A receivable is recognised when the entity’s right to consideration is unconditional except for the passage of time.

Accounting Education

Wealth management offered through Moss Adams Wealth Advisors LLC. Services from India provided by Moss Adams LLP. The contract with the customer should clearly state the reason the customer requests storage—substance. It should also describe when title transfers to the customer—for example, when the product is completed and available for delivery. The company processes and packages frozen foods and sells to a variety of retail customers. One of those retail customers entered into an agreement to purchase a million units of bagged frozen vegetables to be delivered over the next six months as shelf space becomes available in-store. A company manufactures private label snacks for a variety of retail customers. One of those retail customers entered into an agreement with the company to produce a million units of their private label snack so the product stays available and well stocked in its stores throughout the coming year.

  • Failure to do so can inflate actual inventory and present a false impression of which resources are actually available to use in various business processes.
  • Auditors need a complete understanding of the standard and how it affects their clients’ financial statements.
  • In certain scenarios when entering into a volume purchase agreement, free goods or services are provided directly or through a voucher that can be used on future contracts.
  • Builder enters a contract to sell 10 machine parts to a customer for $3,000 on December 31, 20X7, and the customer pays the full amount on that date.
  • A net position of contract asset or contract liability is determined for each contract.
  • A substantive reason may be that the customer lacks storage capacity or its production schedule does not require the goods until a later time.

A sale is a transaction between two parties where one exchanges tangible or intangible goods, services, or assets for money with the other. A bill and hold is a type of sales arrangement that enables payment ahead of the delivery of the item. It constitutes a sales arrangement in which a seller of a product bills a customer for the product upfront but does not ship the product until a later date. Schedules and overrides are only available for bill plans and revenue plans that use a rate-based invoice or revenue method classification. Bill plans and revenue plans provide you with the ability to create a consolidated set of billing attributes that can be shared across contract lines within a contract. Any assets recognised from the costs to obtain or fulfil a contract with a customer.

Call for papers — Research on IASB’s post-implementation reviews of IFRS Standards

Companies provide descriptions of the timing of satisfaction of performance obligations, including the methods used to recognize revenue and an explanation of why the methods provide a faithful depiction of the transfer of goods and services. Companies also disclose information about the transaction price and the amounts allocated to performance obligations.

post balance sheet

The lessee has historically experienced annual net sales in excess of $25 million in the particular space being leased, and it is probable that the lessee will generate in excess of $25 million net sales during the term of the lease. The seller does not have a demonstrated history of completing the remaining tasks in a timely manner and reliably estimating their costs.

Trả lời

Email của bạn sẽ không được hiển thị công khai.