Analysis of Business and Financial Performance of
IAS 18
Income is defined as the increase in economic benefits. This is achieved through increase in assets or decrease in liabilities. And this would ultimately result in the increase in equity.
Revenue is income generated through: sales, fee, interest, dividends and royalties.
Objective of IAS 18 is to tell the accounting treatment of revenue.
Revenue is recognized when it is certain that economic benefits would arise and if these benefits are measurable.
Previous IAS 18 was approved In 1982 and the new IAS 18 supersedes it.
IAS 18 does not deals with:
1) revenue arising from construction related activities.
2) Dividends arising though equity method
3) Insurance contracts
4) Changes in the fair value of assets and liabilities
5) Changes in current assets
6) Changes in biological assets
7) Initial recognition of biological produce
8) Extraction of mineral ores
IFRS 13 Fair Value Management
Fair Value Management:
Fair Value is the price received after selling an asset
Fair Value is the price paid to pay off liabilities
Only income earned by company on its own will be recognized as its revenue. Revenue collected on behalf of a third party won’t be recognized as the revenue. Only commission will be considered as revenue. For example third party could be government, Dell (BBCL relationship)
Revenue shall be measured at the FAIR VALUE
Incase there is a difference in the fair value and the nominal price then the difference would be called Interest Revenue and this is recognized as stated in IFRS 9.
When there is an exchange of goods/services of similar kind than no revenue would be recognized, however if there is an exchange of goods/services or dissimilar type than the revenue is recognized. Fair value would be recorded accordingly.
This standard states that revenue through each transaction should be recognized however each transaction could also be broken down into components and thus revenue recorded accordingly.
Income is defined as the increase in economic benefits. This is achieved through increase in assets or decrease in liabilities. And this would ultimately result in the increase in equity.
Revenue is income generated through: sales, fee, interest, dividends and royalties.
Objective of IAS 18 is to tell the accounting treatment of revenue.
Revenue is recognized when it is certain that economic benefits would arise and if these benefits are measurable.
Previous IAS 18 was approved In 1982 and the new IAS 18 supersedes it.
IAS 18 does not deals with:
1) revenue arising from construction related activities.
2) Dividends arising though equity method
3) Insurance contracts
4) Changes in the fair value of assets and liabilities
5) Changes in current assets
6) Changes in biological assets
7) Initial recognition of biological produce
8) Extraction of mineral ores
IFRS 13 Fair Value Management
Fair Value Management:
Fair Value is the price received after selling an asset
Fair Value is the price paid to pay off liabilities
Only income earned by company on its own will be recognized as its revenue. Revenue collected on behalf of a third party won’t be recognized as the revenue. Only commission will be considered as revenue. For example third party could be government, Dell (BBCL relationship)
Revenue shall be measured at the FAIR VALUE
Incase there is a difference in the fair value and the nominal price then the difference would be called Interest Revenue and this is recognized as stated in IFRS 9.
When there is an exchange of goods/services of similar kind than no revenue would be recognized, however if there is an exchange of goods/services or dissimilar type than the revenue is recognized. Fair value would be recorded accordingly.
This standard states that revenue through each transaction should be recognized however each transaction could also be broken down into components and thus revenue recorded accordingly.