Sale with a right of return in IFRS 15

Sale with a right of return in IFRS 15

Under IFRS 15 Revenue from contract with customers, when an entity makes a sale with a right of return it recognises revenue at the amount to which it expects to be entitled by applying the variable consideration and constraint guidance set out in Step 3 of the model (see Step 3 Determine the transaction price). The entity also recognises a refund liability and an asset for any goods or services that it expects to be returned.

  • An entity applies the accounting guidance for a sale with a right of return when a customer has a right to:
    a full or partial refund of any consideration paid;
  • a credit that can be applied against amounts owed, or that will be owed, to the entity; or
  • another product in exchange (unless it is another product of the same type, quality, condition and price – e.g. exchanging a red sweater for a white sweater). [IFRS 15.B20]

An entity does not account for its stand-ready obligation to accept returns as a performance obligation. [IFRS 15.B21–B22]

In addition to product returns, the guidance also applies to services that are provided subject to a refund.Sale with a right of return

The guidance does not apply to:

  • exchanges by customers of one product for another of the same type, quality, condition and price; and
  • returns of faulty goods or replacements, which are instead evaluated under the guidance on warranties. [IFRS 15.B26–B27]

When an entity makes a sale with a right of return, it initially recognises the following: [IFRS 15.B21, B23, B25]

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IFRS vs US GAAP Employee benefits

IFRS vs US GAAP Employee benefits

The following discussion captures a number of the more significant GAAP differences under both the impairment standards. It is important to note that the discussion is not inclusive of all GAAP differences in this area.

The significant differences and similarities between U.S. GAAP and IFRS related to accounting for investment property are summarized in the following tables.

Standards Reference

US GAAP1

IFRS2

715 Compensation – Retirement benefits

710-10 Compensation- General – Overall

712-10 Compensation – Nonretirement Postemployment Benefits – Overall

IAS 19 Employee Benefits

IFRIC 14 The limit on a defined benefit asset minimum funding requirements and their interaction

Introduction

The guidance under US GAAP and IFRS as it relates to employee benefits contains some significant differences with potentially far-reaching implications.

This narrative deals with employee benefits provided under formal plans and agreements between an entity and its employees, under legislation or through industry arrangements, including those provided under informal practices that give rise to constructive obligations.

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Leveraged buyout IFRS 3 best reporting

Leveraged buyout IFRS 3 best reporting – In corporate finance, a leveraged buyout (LBO) is a transaction where a company is acquired using debt as the main source of consideration. These transactions typically occur when a private equity (PE) firm borrows as much as they can from a variety of lenders (up to 70 or 80 percent of the purchase price) and funds the balance with their own equity. Leveraged buyout IFRS 3 best reporting

1 The process and business reason

The use of leverage (debt) enhances expected returns to the private equity firm. By putting in as little of their own money as possible, PE firms can achieve a large return on equity (ROE) and internal rate of return … Read more

Contract modifications and variable consideration 1 best 2 complete

Contract modifications and variable consideration are sometimes not easy to distinguish from one another. So here is a discussion bringing them together.

IFRS 15 Revenue from Contracts with Customers (contents page is here) introduced a single and comprehensive framework which sets out how much revenue is to be recognised, and when. The core principle is that a vendor should recognise revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the vendor expects to be entitled in exchange for those goods or services. See a summary of IFRS 15 here. Contract modifications and variable consideration

Contract modifications

A contract modification arises when the parties approve a change … Read more

Refund liabilities

Refund liabilities - An entity may receive consideration that it will need to refund to the customer in the future because the refunds of some kind may be made.

Transition to new IFRS 15 Disclosures

Transition to new IFRS 15 Disclosures

Disclosing the chance

 

Transition to new IFRS 15 Disclosures

Transition to new IFRS 15 Disclosures – Disclosures for IFRS 15 Revenue from contracts with customers in respect of transition options:

Requirements: Transition to new IFRS 15 Disclosures

IFRS paragraph Narrative
IAS 1:117(b) Disclose accounting policies that are relevant to understanding the financial statements (i.e. those for material items).
IFRS 15:119 Disclose information about performance obligations in contracts with customers, including a description of all of the following:
  1. When the entity typically satisfies its performance obligations (for example, upon shipment, upon delivery, as services are rendered or upon completion of service), including when performance obligations are satisfied in a bill-and-hold arrangement;
  2. The significant payment terms (for example, when payment is
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Variable consideration in transaction price and 4 best examples

Variable consideration in transaction price

IFRS 15 Revenue from Contracts with Customers (contents page is here) introduced a single and comprehensive framework which sets out how much revenue is to be recognised, and when. The core principle is that a vendor should recognise revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the vendor expects to be entitled in exchange for those goods or services. See a summary of IFRS 15 here. Variable consideration in transaction price

This section is part of step 3 determining the transaction price. Instead of the amount of consideration specified in a contract being fixed, the amount receivable by a Read more

IAS 37 Provisions – best estimate and timely recognition

Provisions can be distinguished from other liabilities such as trade payables and accruals because there is uncertainty about the timing or amount required