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Hello Opentuition
If a company enters into a contract to offer consultancy services at a fee say USD 200. This company was to be paid on submission of an acceptable consultancy report. The company is paid a commitment fee of USD 50 by the customer which amount would be offset from the contract price on submission of the report. At the year end the company had not submitted the report since the client had not yet cleared the draft report. The company applies IFRS 15 when recognising revenue.Should revenue be recognized and of how much? Thanks
Is it right to say that no revenue should be recognized. The USD 50 is treated as deferred income (liability). Thanks
Hi,
This is a provision of services and so the revenue should be recognised over time. We would therefore recognise the revenue based upon the stage of completion of the service, regardless of whether the report has been submitted or not.
The receipt of the 50 would be initially recognised as deferred income but then it would be released over the period whereby the service is provided.
Thanks
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