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Section 23 – Revenue
23.1.1 Exclusions from Section 23
23.2.1 Extract from FRS 102-Section 23.3-23.4
23.2.2.1 Revenue – definition and basic requirements
23.2.2.1.1 Definition of revenue
23.2.2.1.2 Recognition criteria
23.2.2.1.2.1 Definition of probable
23.2.2.1.2.2 Reliable measurement
23.2.2.1.2.3 Sales incentives/rebates/settlement
23.2.2.1.3 Principal versus agent
23.2.2.1.3.1 Definition of an agent
23.2.2.1.3.2 Definition of a person acting as principal
23.2.2.1.3.3 Indication that a party is acting as principal
23.3.1 Extract from FRS 102- Section 23.5
23.4 Exchanges of goods or services
23.4.1 Extract from FRS 102 – Section 23.6-23.7
23.5 Identification of the revenue transaction
23.5.1 Extract from FRS 102 – Section 23.8-23.9
23.5.2.2 Assessing whether separable identifiable components exist
23.5.2.2.1 Methods of allocating total consideration between components
23.5.2.2.1.1 The relative fair value basis
23.5.2.2.1.2 Cost plus a reasonable margin method.
23.5.2.3 Customer loyalty awards
23.5.2.3.1 Issues to consider when determining the fair value of an award.
23.6.1 Extract from FRS 102 – Sections 23.10-23.13
23.6.2.2 Revenue recognition criteria
23.6.2.1.1 Example of risk and rewards of ownership transferring
23.6.2.2.2 Assessing whether ongoing managerial involvement exists.
23.6.2.3 Right of return in exchange for cash/vouchers
23.6.2.7 Sale of extended guarantee
23.6.2.9 Recognition where risk and rewards of ownership based on shipment terms
23.6.2.10 Sale of goods with retention of title clause
23.6.2.12 Goods shipped subject to conditions
23.6.2.15 Sale and repurchase agreements
23.6.2.16 Sales to intermediate parties, such as distributors, dealers or others for Resale
23.6.2.17 Subscriptions to publications and similar items
23.6.2.18 Instalment sales, under which the consideration is receivable in instalments
23.7 Agreements for the construction of real estate
23.7.1 Extract from FRS 102 – Section 23A.14-23A.15
23.8.1 Extract from FRS 102 – Sections 23.14-23.16, 23.21, 23.23-23.24
23.8.2.1 Service recognition criteria
23.8.2.1.1 Costs that relate to future activity
23.8.2.1.2 Reliable measurements not probable.
23.8.2.1.3 Collectability no longer profitable
23.8.2.1.4 Changes in estimates in revenues
23.8.2.2 Intermediate number of acts over specified period
23.8.2.3 Service with a significant act
23.8.2.4 Stage of completion method – 3 methods
23.8.2.4.1 Proportion of costs method
23.8.2.5 Other specific examples as extracted from the Appendix to Section 23 of FRS 102.
23.8.2.5.2 Servicing fees included in the price of the product
23.8.2.5.3 Advertising commissions
23.8.2.5.4 Insurance agency commissions
23.8.2.5.5 Financial services fees
23.8.2.5.8 Initiation, entrance and membership fees
23.8.2.5.9.1 Franchise fees: Supplies of equipment and other tangible assets
23.8.2.5.9.2 Franchise fees: Supplies of initial and subsequent services
23.8.2.5.9.3 Franchise fees: Continuing franchise fees
23.8.2.5.9.4 Franchise fees: Agency transactions
23.8.2.5.10 Fees from the development of customised software
23.9.1 Extract from FRS 102 – Sections 23.17-23.27
23.9.2.1 Definition of construction contract and its importance
23.9.2.1.1 Requirements of length of a construction contract
23.9.2.2 Combination and segmentation of contracts
23.9.2.3 Recognition of Contract revenue and contract costs
23.9.2.4.1 Changes in fair value – reasons
23.9.2.4.2 Penalties and variations – recognition and impact
23.9.2.5.1 Directly related contract costs
23.9.2.5.2 Incidental income from directly related costs
23.9.2.5.3 Costs directly attributable to the contract in general – overhead costs
23.9.2.5.3.1 Costs excluded from directly attributable overhead costs
23.9.2.5.4 Directly attributable costs to be excluded (specific costs)
23.9.2.6 Percentage of completion
23.9.2.6.1 Methods to determine the percentage of completion
23.9.2.6.1.1 Preparation of costs incurred over total expected costs
23.9.2.6.1.2 Surveys of work performed
23.9.2.6.1.3 Completion of physical preparation of contract work
23.9.2.6.2 Assessment of which method to use
23.9.2.7 Reliable measurement – stage of completion cost to complete
23.9.2.8 Loss expected on contract
23.10.1 Extract from FRS102 – Section 23.29(a)
23.11.1 Extract from FRS102 – Section 23.29(b)
23.11.2.2 Assignment of rights
23.11.2.3 Licence fee or royalty contingent on future events
23.11.2.4 Points to consider when deciding recognition initially or over a period of time.
23.12.1 Extract from FRS102 – Section 23.29(c)
23.13.1 Extract from FRS102 – Section 23.30
23.13.2.1.2 Acconting policy for insuracne broker
23.13.2.1.4 Accountig policy note where turnover is derived from investments.
23.13.2.1.5 Accounting policy for a software company
23.13.2.1.6 Extract from accounting policy showing royalty income.
23.13.2.1.8 Contracting work – accounting policy
23.13.2.2 Note to the financial statements
23.13.2.2.1 Turnover and segmental analysis
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Examples
Example 1: Redeemable preference shares at option of the holder with mandatory coupon.
Example 2: Non-redeemable preference shares with mandatory coupon at market rate.
Example 4: Shares redeemable at the option of the holder
Example 5: Non-redeemable preference shares with discretionary dividend.
Example 6: Redeemable preference shares at option of issuer with discretionary dividend.
Example 7: Redeemable preference shares at option of issuer with mandatory dividend.
Example 13: Fixed for fixed arrangement
Example 13A: Application of Section 22.3(b)(ii) of FRS 102.
Example 13B: Future contingency amount
Example 13C: Future contingency.
Example 14: Accounting treatment on original issue of shares.
Example 15: Accounting treatment on original issue of shares – left as unpaid.
Example 16: Capitalisation/bonus issue.
Example 17: Accounting treatment for a compound financial instrument
Example 18: compound instrument where conversion is chosen.
Example 19: compound instrument where conversion is chosen.
Example 20: Accounting for transaction costs in acquiring a compound financial instrument
Example 21: Acquiring a further controlling interest
Example 22: Acquiring a further controlling interest
Example 23: Disposing of controlling interest but controlling interest retained.
Example 24: Extract of Statement of Changes in Equity from financial statements.
Example 25: Extract from accounting policies note.
Example 27: Extract from notes to the financial statements – share capital
Example 28: Extract from notes to the financial statements – dividends on equity shares.
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