Multiple advances for one delivery of goods

Multiple advances for one delivery of goods is an example presented in IFRIC 22 Foreign Currency Transactions and Advance Consideration. Other examples are: Multiple advances and multiple service deliveries, and Multiple advances and multiple deliveries of goods.

These examples accompany, but are not part of, IFRIC 22. Multiple advances for one delivery of goodsMultiple advances for one delivery of goods

In these examples, foreign currency amounts are ‘Foreign Currency’ (FC) and functional currency amounts are ‘Local Currency’ (LC).

The objective of these examples is to illustrate how an entity determines the date of the transaction when it recognises a non-monetary asset or non-monetary liability arising from advance consideration in a foreign currency before it recognises the related asset, expense or income (or part of it) applying relevant IFRSs.

Example 2—Multiple receipts for revenue recognised at a single point in time Multiple advances for one delivery of goods

On 1 June 20X2, Entity B entered into a contract with a customer to deliver goods on 1 September 20X2. The total fixed contract price is an amount of FC100, of which FC40 is due and received on 1 August 20X2 and the balance is receivable on 30 September 20X2.

Entity B initially recognises a non-monetary contract liability translating FC40 into its functional currency at the spot exchange rate between the functional currency and the foreign currency on 1 August 20X2. Applying paragraph 23(b) of IAS 21, Entity B does not update the translated amount of that non-monetary liability.

Applying paragraph 31 of IFRS 15 Revenue from Contracts with Customers, Entity B recognises revenue on 1 September 20X2, the date on which it transfers the goods to the customer.

Entity B determines that the date of the transaction for the revenue relating to the advance consideration of FC40 is 1 August 20X2. Applying paragraph 22 of IAS 21, Entity B determines that the date of the transaction for the remainder of the revenue is 1 September 20X2.

On 1 September 20X2, Entity B:Multiple advances for one delivery of goods,IFRIC 22 Multiple advances for one delivery of goods,multiple receipts single point in time revenue recognition

  1. derecognises the contract liability of FC40 and recognises revenue using the exchange rate on 1 August 20X2; and
  2. recognises revenue of FC60 and a corresponding receivable using the exchange rate on that date (1 September 20X2).

The receivable of FC60 recognised on 1 September 20X2 is a monetary item. Entity B updates the translated amount of the receivable until the receivable is settled.


Background IFRIC Interpretation 22

Foreign Currency Transactions and Advance Consideration Multiple advances for one delivery of goods

Paragraph 21 of IAS 21 The Effects of Changes in Foreign Exchange Rates requires an entity to record a foreign currency transaction, on initial recognition in its functional currency, by applying to the foreign currency amount the spot exchange rate between the functional currency and the foreign currency (the exchange rate) at the date of the transaction.

Paragraph 22 of IAS 21 states that the date of the transaction is the date on which the transaction first qualifies for recognition in accordance with IFRS Standards (Standards).

When an entity pays or receives consideration in advance in a foreign currency, it generally recognises a non-monetary asset or non-monetary liability before the recognition of the related asset, expense or income. The related asset, expense or income (or part of it) is the amount recognised applying relevant Standards, which results in the derecognition of the non‑monetary asset or non‑monetary liability arising from the advance consideration. Multiple advances for one delivery of goods

The IFRS Interpretations Committee (the Interpretations Committee) initially received a question asking how to determine ‘the date of the transaction’ applying paragraphs 21–22 of IAS 21 when recognising revenue. The question specifically addressed circumstances in which an entity recognises a non-monetary liability arising from the receipt of advance consideration before it recognises the related revenue. Multiple advances and multiple deliveries of goods. Multiple advances for one delivery of goods

In discussing the issue, the Interpretations Committee noted that the receipt or payment of advance consideration in a foreign currency is not restricted to revenue transactions. Accordingly, the Interpretations Committee decided to clarify the date of the transaction for the purpose of determining the exchange rate to use on initial recognition of the related asset, expense or income when an entity has received or paid advance consideration in a foreign currency. Multiple advances for one delivery of goods

See also: The IFRS Foundation

Multiple advances for one delivery of goods