Significant financing component — Accounting glossary

Assess the difference between promised consideration and the cash selling price, the time between transfer and payment, and prevailing interest rates. Adjust the transaction price for the time value of money where required, and recognise interest separately from revenue. IFRS 15 includes specified exceptions and a practical expedient when the period between transfer and payment is expected to be one year or less. Not every advance payment or deferred payment represents financing.

Worked example

A customer pays $110,000 two years after receiving goods whose cash selling price is $100,000. If the difference is a significant financing component and no exception applies, revenue is $100,000 on transfer; the financing return is recognised separately over the credit period.

Common mistake

Treating the full deferred payment as immediate revenue or assuming every advance paid for a business reason is financing.

Where it appears in your exams

Qualification	Exam	Relationship	Period
ACCA	FR	Direct	September 2026–June 2027
ACCA	SBR	Direct	September 2026–June 2027