Overview

IAS 18 Revenue outlines the accountancy requirements for once to recognise revenue indigenous the revenue of goods, rendering of services, and for interest, royalties and also dividends. Revenue is measured at the fair value of the consideration received or receivable and recognised as soon as prescribed conditions are met, which depend on the nature the the revenue.

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IAS 18 to be reissued in December 1993 and is operative for periods start on or after ~ 1 January 1995.


History the IAS 18

April 1981Exposure draft E20 Revenue Recognition
December 1982IAS 18 Revenue Recognition
1 January 1984Effective date of IAS 18 (1982)
May 1992E41 Revenue Recognition
December 1993IAS 18 Revenue recognition (revised as component of the "Comparability of jae won Statements" project)
1 January 1995Effective day of IAS 18 (1993) Revenue Recognition
December 1998Amended by IAS 39 jae won Instruments: Recognition and Measurement, reliable 1 January 2001
16 April 2009Appendix to IAS 18 amended for annual Improvements come IFRSs 2009. The now provides guidance because that determining even if it is an reality is acting together a major or together an agent.
1 January 2018IAS 18 will certainly be superseded through IFRS 15 Revenue native Contracts with Customers

Related Interpretations

Summary that IAS 18

Objective that IAS 18

The target of IAS 18 is come prescribe the accounting treatment for revenue occurring from certain varieties of transactions and also events.

Key definition

Revenue: the gross inflow of economic benefits (cash, receivables, various other assets) emerging from the simple operating tasks of an reality (such as sales that goods, sales that services, interest, royalties, and dividends).

Measurement the revenue

Revenue need to be measured at the fair value of the consideration received or receivable. an exchange for products or services of a comparable nature and value is not concerned as a transaction the generates revenue. However, exchanges because that dissimilar items are related to as generating revenue.

If the inflow that cash or cash equivalents is deferred, the fair worth of the consideration receivable is less than the nominal lot of cash and cash equivalents to be received, and discounting is appropriate. This would certainly occur, for instance, if the seller is providing interest-free credit to the the person who lives or is charging a below-market rate of interest. Interest need to be imputed based upon market rates.

Recognition that revenue

Recognition, as identified in the IASB Framework, means incorporating an object that meets the an interpretation of revenue (above) in the income statement once it meets the following criteria:

it is probable that any kind of future economic benefit connected with the item of revenue will circulation to the entity, andthe amount of revenue can be measured v reliability

IAS 18 offers guidance because that recognising the following certain categories that revenue:

Sale that goods

Revenue arising from the revenue of goods should it is in recognised when all of the adhering to criteria have actually been satisfied:

the seller has transferred come the the person who lives the far-reaching risks and also rewards of ownershipthe seller maintain neither continuing managerial involvement come the level usually associated with property nor effective control over the goods soldthe amount of revenue can be measure up reliablyit is probable that the economic benefits linked with the transaction will flow to the seller, andthe expenses incurred or to be occurs in respect of the transaction can be measure up reliably

Rendering that services

For revenue arising from the rendering of services, provided that all of the complying with criteria are met, revenue must be recognised by reference to the stage of perfect of the transaction at the balance sheet date (the percentage-of-completion method):

the amount of revenue deserve to be measure reliably;it is probable that the economic benefits will flow to the seller;the phase of perfect at the balance sheet date can be measured reliably; andthe expenses incurred, or to it is in incurred, in respect the the transaction deserve to be measured reliably.

See more: Companies May Sell Their Receivables This Practice Is Called

When the above criteria room not met, revenue developing from the calculation of services need to be recognised just to the level of the expenses recognised that space recoverable (a "cost-recovery approach".

Interest, royalties, and also dividends

For interest, royalties and dividends, noted that it is probable the the economic benefits will circulation to the enterprise and also the quantity of revenue can be measured reliably, revenue must be recognised as follows:

interest: making use of the reliable interest method as set out in IAS 39royalties: on an accruals communication in accordance through the substance of the pertinent agreementdividends: when the shareholder"s ideal to obtain payment is established

Disclosure

accounting policy for recognising revenueamount of each of the following species of revenue:sale of goodsrendering of servicesinterestroyaltiesdividendswithin every of the over categories, the amount of revenue native exchanges of products or services

Implementation guidance

Appendix A to IAS 18 provides illustrative instances of how the above principles use to details transactions.