Summary of IAS 18 Essay Example for Free

Summary of IAS 18 Essay tax revenue the gross inflow of economic benefits (cash, receivables, different assets) arising from the ordinary operating activities of an entity (such as sales of goods, sales of services, interest, royalties, and dividends). IAS 18.7Measurement of RevenueRevenue should be measured at the fair value of the consideration acquire or receivable. IAS 18.9 An exchange for goods or services of a similar nature and value is not regarded as a dealings that generates tax income. However, exchanges for dissimilar items atomic number 18 regarded as generating revenue. IAS 18.12 If the inflow of cash or cash equivalents is deferred, the fair value of the consideration receivable is less than the nominal amount of cash and cash equivalents to be received, and discounting is appropriate. This would occur, for instance, if the vender is providing interest-free credit to the buyer or is charging a below-market rate of interest. Interest must be imputed based on market rates. IAS 18.11Recognition of RevenueRecognition, as specify in the IASB Framework, means incorporating an item that meets the definition of revenue (above) in the income statement when it meets the following criteria it is presumptive that any future economic benefit associated with the item of revenue will flow to the entity, and the amount of revenue can be measured with reliability IAS 18 provides guidance for recognising the following specific categories of revenue Sale of GoodsRevenue arising from the sale of goods should be recognised when all of the following criteria have been satisfied IAS 18.14 the seller has transferred to the buyer the significant risks and rewards of ownership the seller retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold the amount of revenue can be measured reliably it is probable that the economic benefits associated with the transaction will flow to the seller, and the costs incurred or to be incurred in respect of the transaction can be measured reliably exposition of ServicesFor revenue arising from the rendering of services, provided that all of the following criteria are met, revenue should be recognised by reference to the constitute of completion of the transaction at the balance sheet date (the percentage-of-completion method) IAS 18.20 the amount of revenue can be measured reliably it is probable that the economic benefits will flow to the seller the stage of completion at the balance sheet date can be measured reliably and the costs incurred, or to be incurred, in respect of the transaction can be measured reliably. When the above criteria are not met, revenue arising from the rendering of services should be recognised only to the extent of the expenses recognised that are recoverable (a cost-recovery approach. IAS 18.26 Interest,Royalties, and DividendsFor interest, royalties and dividends, provided that it is probable that the economic benefits will flow to the enterprise and the amount of revenue can be measured reliably, revenue should be recognised as follows IAS 18.29-30 interest using the effective interest method as set out in IAS 39 royalties on an accruals basis in accordance with the capacity of the relevant agreement dividends when the shareholders right to receive payment is established Disclosure