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Hello Stephen;
If at the start of the year an entity enters into a contract to sell goods to another entity worth say USD 3 million payable after 3 years. This entity recognised the entire USD 3 million as sales during the year. Discount rate is 7%.What is the implication of this 7%? Should revenue be recognized and of how much if any following these facts in the scenario?
Thanks stephe.
Dr Receivables Cr Revenue – with 3m discounted for 2 yrs – 2.62m
Then unwind discount over 2 years
Dr Receivables Cr Finance income
Thanks. This finance income do we recognise spread it over the three years? Or show a recognition of it all at once
Over 3 years – unwinding discount.
I misread your original question – we will discount for 3 years not 2!
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