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Hello Sir,
I hope you are doing good.
I had a question regarding provisions as per IFRS 15.
According to a contract, A provides products to B (B is an company selling its products online). B has policy which allows its customer a 7 day return policy. The contract between A and B, states that due to this policy any products returned to B have to be taken back by Co A.Should any provision be taken by A for any sales made to B towards the year end? If yes, how would that provision be taken?
Waiting for your kind regards
Hi,
I’m well, thanks. According it IAS 37 (not IFRS 15) a provision is made if there is a present obligation (legal/constructive), which given the contract terms between the two means there is a provision to be made.
The provision would be based on the best estimate of what has been returned to date and what is expected to be returned in the near future. It is an area of judgement.
Thanks
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