There is a situtation:
"Revenue Recognition:
Fashion Co. uses a streamlined online sales process, which involves multiple steps, each relevant for revenue recognition.
- Order Processing: When a customer places an order, the system records the sale, but revenue is only recognized once the product is dispatched. The dispatch process triggers revenue recognition.
- Refunds & Returns: Fashion Co. allows a 7-day return window
- Marketplace Sales: The company also sells through Nykaa and Myntra, where sales commissions are deducted before funds are transferred. For every ?100 sold, the company receives approximately ?85 after platform fees
In this what is the consideration type, is it variable, and how do we record it, this was a scenario from AAA, is there any mismatch here with the accounting policies??
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SBR topic doubt Revenue IFRS 15
1y ago#1Consideration type = cash
Variable = no
Record = on despatch (less expected returns)
Mismatch = don't understand your question
I meant to ask in IFRS 15, there is a type of consideration called variable consideration, which states that "goods when sold with a right to return fall under variable consideration, and it can be only recorded under variable consideration, when there is no significant chance of reversal of the cumulative revenue recognised"
My doubt was if why is the revenue being recorded on despatch, shouldn't it be recorded post 7 days, because the customer still holds a right to return the goods, is this right?? if not then what will the right accounting treatment??
1y ago#3If the company sells 100 goods and (based on estimates) there's a 30% chance of returns:
Dr Cash 100
Cr Revenue 70
Cr Contract liability 30
The goods likely to be returned remain in inventory
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