Wiley International Trends in Financial Reporting under IFRS: Including Comparisons with US GAAP, Chinese GAAP, and Indian GAAP

CHAPTER 7

REVENUE (IAS 18)

1. OBJECTIVE

1.1 This Standard prescribes the accounting treatment for the recognition of revenue arising from sale of goods, for the rendering of services, and for interest, royalties, and dividends.

1.2In November 2011, the International Accounting Standards Board (IASB) and the US-based Financial Accounting Standards Board (FASB) reissued an Exposure Draft (ED) titled Revenue from Contracts with Customers with the aim of improving financial reporting by creating a single revenue recognition Standard, clarifying the principles for recognizing revenue, and creating consistent principles that can be applied across various transactions, industries, and capital markets. The comment letters on the revised ED were due by March 13, 2012. If adopted, the proposals would supersede International Accounting Standard (IAS) 18, Revenue, and IAS 11, Construction Contracts, and related Interpretations.

2. SYNOPSIS OF THE STANDARD

The summary of this Standard, which deals with the primary issue of when to recognize revenue, follows.

2.1 The provisions of this Standard should be applied in the accounting for revenue arising from

• Sale of goods
• Rendering of services
• The use of the entity’s assets by third parties that yields interest, royalties, or dividends

2.1.2 This Standard, however, does not deal with revenue that arises from the following sources, since they are dealt with by other Standards:

• Lease Agreements (IAS 17)
• Dividends from Investments That Are Accounted ...