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Disclosures
Extract from FRS102 – Section 23.30
General disclosures about revenue
23.30 An entity shall disclose:
(a) the accounting policies adopted for the recognition of revenue, including the methods adopted to determine the stage of completion of transactions involving the rendering of services; and
(b) the amount of each category of revenue recognised during the period, showing separately, at a minimum, revenue arising from:
(i) the sale of goods;
(ii) the rendering of services;
(iii) interest;
(iv) royalties;
(v) dividends;
(vi) commissions;
(vii) grants; and
(viii) any other significant types of revenue.
Disclosures relating to revenue from construction contracts
23.31 An entity shall disclose the following:
(a) the amount of contract revenue recognised as revenue in the period;
(b) the methods used to determine the contract revenue recognised in the period; and
(c) the methods used to determine the stage of completion of contracts in progress.
23.32 An entity shall present:
(a) the gross amount due from customers for contract work, as an asset; and
(b) the gross amount due to customers for contract work, as a liability.
OmniPro comment
See below for illustration of the above requirements. Company law requires deferred revenue to be disclosed separately in the creditors note. In addition Company law requires a split of turnover by market also by revenue type where the markets/types are significantly different. However, where disclosure of this information would be seriously prejudicial to the interest of the company that information need not be provided but the reason for not providing same must be disclosed.
Example 31 – Extract from the Accounting policy notes
1.1. Turnover Turnover represents net sales to customers and excludes trade discounts and Value Added Tax. Turnover from the sale of goods is recognised when the significant risks and rewards of ownership of the goods have passed to the buyer, usually on dispatch of the goods. Turnover from the provision of services is recognised in the accounting period in which the services are rendered and the outcome of the contract can be estimated reliably. The company uses the percentage of completion method based on the actual service performed as a percentage of the total services to be provided. Revenue in relation to maintenance and support is recognised on a straight line basis over the term of the contract with any unearned revenue included in deferred revenue. ACCOUNTING POLICY FOR AN INSURANCE BROKER Turnover – commission income Turnover represents commissions earned in the period together with overrider and profit commissions receivable. Commission income is recognised in the accounting period in which the policy commences. To the extent that future services need to be provided over the life of the policy which straddles an accounting period, revenue is deferred. Commission income in relation to claims handling is recognised in the accounting period in which the claims are settled. Overrider and profit commissions, if any, are recognised in line with the underlying agreements and amounts confirmed by product providers. ACCOUNTING POLICY FOR A MANUFACTURING COMPANY THAT PRODUCES, INSTALLS AND ALSO ENGAGES IN LONG TERM CONTRACTS USING THE STAGE OF COMPLETION Turnover Turnover, excluding value added tax, represents the income received and receivable from third parties, in the ordinary course of business, for goods and services provided. Any discounts given to customers are deducted from turnover. Revenue from the sale of products is recognised when the goods are dispatched to the customer. Revenue from the servicing of machines is recognised over the period of the performance of the service. Proceeds received in advance of product dispatch or performance of service are recorded as deferred revenue in the balance sheet. Revenue from the sale of machines and manufactured steel components is recognised over the period of the design, build and installation contract. Where the outcome of a long-term contract can be estimated reliably, revenue and costs are recognised by reference to the stage of completion of the contract activity at the balance sheet date. This is normally measured by surveys of work performed to date. Variations in contract work are included to the extent that it is probable that they will result in revenue and they are capable of being reliably measured. When the outcome of a long-term contract cannot be estimated reliably, contract revenue is recognised to the extent of contract costs incurred and that it is probable it will be recoverable. Contract costs are recognised as expenses in the period in which they are incurred. When it is probable that total contract costs will exceed total contract revenue, the expected loss is recognised as an expense immediately. ACCOUNTING POLICY NOTE WHERE TURNOVER IS DERIVED FROM INVESTMENTS Turnover Turnover represents dividends and other income received on investments held, net of irrecoverable withholding taxes. Dividends are recognised in the period to which the dividends relate. Government grants Government grants are recognised when it is reasonable to expect that the grants will be received and all related conditions will be met. Grants that relate to specific capital expenditure are treated as deferred income which is then credited to the profit and loss account over the related asset’s useful life on an accruals basis. Revenue grants are credited to the profit and loss account when receivable so as to match them with the expenditure to which they relate. Dividends Dividends from the company’s shares are recognised as income on receipt of the dividend. ACCOUNTING POLICY FOR A SOFTWARE COMPANY Turnover Turnover, which excludes value added tax, represents the invoiced value of goods and services supplied and the value of long term contract work done, as outlined below. The company usually sells its software as part of an overall solution offered to a customer, in which significant customisation and modification to the company’s software generally is required. As a result, revenue generally is recognised over the course of these long term projects. Initial license fee for software revenue is recognised as work is performed, under the percentage of completion method of accounting. Subsequent license fee revenue is recognised upon completion of the specified conditions in each contract. Service revenue that involves significant ongoing obligations, including fees for customisation, implementation and modification, is recognised as work is performed, under the percentage of completion method of accounting. Software revenue that does not require significant customisation and modification, is recognised upon delivery and installation. In managed service contracts, revenue from operation and maintenance of customers’ billing systems is recognised in the period in which the bills are produced. Revenue from ongoing support is recognised as work is performed. Revenue from third–party hardware and software sales is recognised upon delivery and installation, and recorded at gross or net amount according to whether the company acts as a Principal or as an Agent. Maintenance revenue is recognised ratably over the term of the maintenance agreement, which in most cases is one year or less. Losses are recognised on contracts in the period in which the liability is identified. Extract from accounting policy showing royalty income. Turnover reflects amounts received or receivable in respect of patent royalties license income. Extract from notes to the financial statements for revenue showing revenue by market and class Turnover and segmental analysis Turnover comprises the invoice value of goods and services supplied by the company exclusive of trade discounts and value-added tax derived from the company’s principal activities.
| Turnover by segment: | 2015 | 2014 |
| € | € | |
| Revenue from construction contracts | XXXX | XXXX |
| Rental income | XXXX | XXXX |
| Sale of services | XXXX | XXXX |
| Sale of goods | XXXX | XXXX |
| XXXX | XXXX |
The amount of turnover by destination is as follows:
| 2015 | 2014 | |
| € | € | |
| EU Countries | XXXX | XXXX |
| Russia | XXXX | XXXX |
| Africa | XXXX | XXXX |
| Australia and New Zealand | XXXX | XXXX |
| Asia | XXXX | XXXX |
| XXXX | XXXX |
Extract from notes to the financial statements for revenue where exemption claimed due to its inclusion being seriously prejudicial to the entity Turnover and segmental analysis The company operates in one principal area of activity, that of providing business support systems and related services to the communications industry. It also operates within three geographical markets: Europe, XXXXXX and the rest of the world. No detailed business and geographical segment analysis of the company is disclosed as, in the opinion of the directors, any of these disclosures would be seriously prejudicial to the interest of the company. Extract from notes to the financial statements for revenue derived by brokers
| 2 Commission income | 2015 | 2014 |
| € | € | |
| Commission income represents commission earned as follows: | ||
| Gross value of contracts and services transacted | XXXXXX | XXXXXX |
| Commission income earned | XXXXX | XXXXX |
Extract from notes to the financial statements for construction contracts ACCOUNTING POLICY NOTE Turnover – contracting work Where the outcome of a construction contract can be estimated reliably, revenue and costs are recognised by reference to the stage of completion of the contract activity at the balance sheet date. This is normally measured by reference to the proportion of costs incurred up to the date of the balance sheet to the estimated total costs. Variations in contract work, claims and incentive payments are included to the extent that it is probable that they will result in revenue and they are capable of being reliably measured. When the outcome of a construction contract cannot be estimated reliably, contract revenue is recognised to the extent of contract costs incurred and that it is probable it will be recoverable. Contract costs are recognised as expenses in the period in which they are incurred. When it is probable that total contract costs will exceed total contract revenue, the expected loss is recognised as an expense immediately. Turnover and segmental analysis Turnover comprises the invoice value of goods and services supplied by the company exclusive of trade discounts and value-added tax derived from the company’s principal activities.
| Turnover by segment: | 2015 | 2014 |
| € | € | |
| Revenue from construction contracts | XXXX | XXXX |
| Sale of goods | XXXX | XXXX |
| XXXX | XXXX |
| Debtors | 2015 | 2014 |
| € | € | |
| Trade debtors | XXXXX | XXXXX |
| Prepayments and other debtors | XXXXX | XXXXX |
| Corporation tax | – | – |
| Value added tax | – | – |
| Amounts due from customers for contract work | XXXXX | XXXXX |
| XXXX | XXXX |
| Creditors | 2015 | 2014 |
| € | € | |
| Trade creditors | XXXXX | XXXXX |
| Corporation tax | – | – |
| Deferred revenue | – | – |
| Amounts due to customers for contract work | XXXXX | XXXXX |
| XXXX | XXXX |
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