- This topic has 1 reply, 2 voices, and was last updated 7 years ago by
.
- Posts
Dear sir,
I am having some problem with understanding the revenue definition as per ifrs 15. it says that revenues is the gross inflow of economic benefits arising in course of ordinary activities of entity (when those inflows result in increase in equity) other than those relating to contributions from equity participants.i am having trouble only with the part above inside the brackets,
For example, a business purchases item for sale for $10 , and actually sales it with no profit $ 10 , assuming no other expenses . now this transaction would not result in increase in equity. and as per definition inflows should result in increase in equity.
My Question is what would be the revenue in this case when item is being sold on no profit , no loss,.Dear Sir , i know i had put too much text but this definition is stuck in my head and confused me too much i had already tried to get answer from many other resources , but could not find one, i shall be very thankful to you if you can explain the revenue definition especially the part in bracket. Thanks in advance
What you have quoted above is the definition of ‘Income’ (per the IASPLUS website)
‘Income is increases in economic benefits during the accounting period in the form of inflows or enhancements of assets or decreases of liabilities that result in an increase in equity, other than those relating to contributions from equity participants’
The definition of ‘Revenue’ is slightly different (again, from the IASPLUS website)
‘Revenue is income arising in the course of an entity’s ordinary activities’
Well, that’s all very well except that now we are in a loop because, within the ‘revenue’ definition is used the word ‘income’
Instead of getting over-excited about this, think of the other words frequently used to describe ‘revenue’
These typically would be either ‘Sales” or ‘Turnover’ and, in both those cases it’s easy to see how your $10 sale would be included as part of revenue but would not be taken within the definition of ‘income’ (because there is no inflow of economic benefit … the sale of an asset at cost results in no improvement of economic benefit)
Is this any better for you?
- The topic ‘Revenues’ is closed to new replies.