ENSEÑANZA EN LAS PRÁCTICAS

IFRS23.1 IAS 18 has a similar scope to FRS 102. However, revenue arising from the extraction of mineral ores and changes in the value of current assets are excluded from the scope of IAS 18.

IFRS23.2 IFRIC 13 provides additional guidance on customer loyalty programmes. This includes the required accounting when a third party issues awards and the recognition of onerous awards.

IFRS23.3 IFRIC 15 provides more detailed guidance on the accounting for the construction of real estate. These arrangements are accounted for under either IAS 11 or IAS 18, primarily depending on when control of the constructed asset passes to the customer. IFRIC 15 introduces the concept of continuous transfer. The continuous transfer method is not included in FRS 102.

© 2013 KPMG LLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative, a Swiss entity. All rights reserved.

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23.9 Customer loyalty schemes, in which the customer is granted an award that it may redeem in the future for free or discounted goods or services, are accounted for as a separately identifiable component of the initial sales transaction. The fair value of the consideration received or receivable in respect of the initial sale is allocated

between the loyalty award and the other components of the sale. The consideration apportioned to the loyalty award is measured by reference to the fair value of the award credits, i.e. the amount for which they could be sold

separately. [FRS102.23.9] Sale of goods

23.10 Revenue from the sale of goods is recognised when:

• the significant risks and rewards of ownership of the goods have been transferred to the buyer;

• the seller does not retain a level of continuing managerial involvement usually associated with ownership or effective control over the goods sold;

• the amount of revenue and costs incurred or to be incurred in respect of the transaction can each be measured reliably; and

• it is probable that economic benefits will flow to the entity as a result of the transaction. [FRS102.23.10] 23.11 This assessment requires an examination of the circumstances of the transaction. In most cases the risks and

rewards of ownership pass when legal title or possession transfers to the buyer. This would apply to most retail sales. Examples of situations when the seller retains the significant risks and rewards include:

• when the seller retains an obligation for unsatisfactory performance beyond that covered by a normal warranty arrangement;

• when the receipt of revenue is contingent on the buyer selling the goods to a third party;

• when goods are shipped subject to installation and that installation, which is a significant part of the contract, is not yet complete; and

• when the buyer has a right to return the goods, either for reasons specified in the sales contract or at the buyer’s discretion, and the seller is not certain about the probability of return. [FRS102.23.11-12]

23.12 If only an insignificant risk of ownership is retained by the seller, revenue is recognised. This is the case when legal title is retained solely to protect the collectability of the amount due or when a refund is offered for faulty goods and the probability of such returns can be estimated reliably. [FRS102.23.13]

Rendering of services

23.13 When the outcome of a transaction involving the rendering of services can be estimated reliably, revenue is recognised using the percentage of completion method. The outcome can be estimated reliably when the revenue, costs incurred and costs to complete the transaction can be measured reliably, it is probable that economic benefits will flow to the entity and the stage of completion at the reporting date can be measured reliably. [FRS102.23.14] 23.14 When the services performed are an indeterminate number of acts over a specified period of time, revenue is

recognised on a straight-line basis unless another revenue recognition method better represents the stage of completion. If one specific act within the contract is much more significant than any other act, recognition of revenue is postponed until that act has been performed. [FRS102.23.15]

23.15 If the outcome of the transaction cannot be estimated reliably, revenue is recognised only to the extent of the expenses recognised that are recoverable. [FRS102.23.16]

Construction contracts

23.16 A construction contract is a contract specifically negotiated for the construction of an asset or a combination of assets that are closely interrelated or interdependent in terms of design, technology and function or their ultimate purpose or use. [FRS102.GL]

23.17 Contract revenue and contract costs associated with a construction contract are recognised as revenue and

expenses respectively by reference to the stage of completion of the contract when the outcome of the contract can be estimated reliably (the percentage of completion method). The outcome can be estimated reliably when the stage of completion, future costs and collectability of billings can be estimated reliably. [FRS102.23.17]

23.18 In some circumstances it may be necessary to treat identifiable components of a single contract separately or to consider a group of contracts together in order to reflect the substance of a contract or a group of contracts. [FRS102.23.18]

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| Cutting through UK GAAP

© 2013 KPMG LLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative, a Swiss entity. All rights reserved.

23 Revenue |

23.19 Some construction contracts cover the construction of a number of assets. The construction of each asset is treated as a separate contract when separate plans subject to separate negotiation are submitted for each asset, the contractor and customer may accept or reject parts of the contract relating to each asset and the costs and revenues of each asset can be separately identified. [FRS102.23.19]

23.20 A group of contracts is treated as a single construction contract, whether with a single customer or with several customers, when the contracts are negotiated as a single arrangement that is in effect a single project with an overall profit margin and the contracts are performed concurrently or in a continuous sequence. [FRS102.23.20] Percentage of completion method

23.21 Revenue from rendering services and from construction contracts is recognised using the stage or percentage of completion method. The estimates of revenue and costs are reviewed and, when necessary, revised as the arrangement progresses. [FRS102.23.21]

23.22 Stage of completion of a transaction or contract is determined using the method that measures the work performed most reliably. Progress payments and advances received from customers are often not representative of the work performed. Techniques to measure the stage of completion include:

(a) the costs incurred for work performed to date as a proportion of the estimated total costs. Costs incurred for work performed to date do not include costs relating to future activity, such as for materials or prepayments; (b) surveys of work completed;

(c) completion of a physical proportion of the contract work or the completion of a proportion of the service contract. [FRS102.23.22]

23.23 Prepayments or other costs that relate to future activity, such as materials, are recognised as an asset when it is probable that those costs will be recovered. [FRS102.23.23] Costs whose recovery is not probable are recognised immediately as an expense. [FRS102.23.24]

23.24 If the outcome of a construction contract cannot be estimated reliably:

(a) revenue is recognised only to the extent of contract costs incurred, when it is probable that those amounts will be recoverable; and

(b) contract costs are recognised as an expense in the period in which they are incurred. [FRS102.23.25]

23.25 Expected losses (when it becomes probable that contract costs will exceed contract revenue) are recognised as an expense in profit or loss immediately. A corresponding onerous contract provision is recognised. [FRS102.23.26] 23.26 When the collectability of an amount already recognised as revenue is no longer probable, this is recognised as an

expense. Contract revenue is not adjusted. [FRS102.23.27] Interest, royalties and dividends

23.27 Revenue arising from the use of an entity’s assets by others, yielding interest, royalties or dividends for the entity, is recognised when it is probable that economic benefits associated with the transaction will flow to the entity and the amount can be measured reliably. [FRS102.23.28]

23.28 Interest income is recognised using the effective interest method as described in paragraph 11.21 of this publication. Royalties are recognised on an accruals basis in accordance with the substance of the relevant agreement.

Dividends are recognised when the entity’s right, as shareholder, to receive payment is established. [FRS102.23.29] Further guidance

23.29 The appendix to Section 23 Examples of revenue recognition under the principles in Section 23 provides further examples on the application of these requirements.

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