FRS 118 Revenue

Chapter 19
1
a. Recognised revenue on 20 sets when risks and rewards are transferred and make a
provision for warranty based on the number of sets sold. 20 sets x10% x500
R!1"000.
b. Recognise R!2"000 on the sale of the policy.
c. #an recognise revenue of R!2"000 when the goods are transferred to the customer.
$he balance of R!1"200 is receivable.
d. %nterest for x& is R!20"000 x &% x10'12 R!1"000. %nterest to be recognised in x(
is 1"200 x 2'12 R!1"000.
e. R!)&0 received is to be spread over 2* months i.e. R!*0 per month beginning
+pril x&. Revenue to be recognised is R!*0 x ) R!,&0.
f. Revenue to be recognised in x( when the concert is staged.
g. R!25"000 spread over five months beginning -ctober. Revenue for x& is 25"000'5
x , R!15"000.
h. R!500 is rental income.
i. Revenue to be recognised on fulfilment of contract i.e. make full payment and the
goods are given to the customer.
.. Revenue to be recognised on delivery of flowers.
k. Revenue to be recognised in /ebruary x(.
l. Recognise R!2.5 million for the five concerts staged.
m. !odern shoes can recognise revenue on sales of ,0% of the R!500"000 and has
incurred expenses of 10% commission of R!15"000. $he unsold stock should
appear in the balance sheet of !odern 0hoes.
n. Revenue can be recognised on delivery of goods in /ebruary x( only.
o. Revenue is recognised based on work done. +s &0% work is completed" 1ac2ues
can recognise R!1.2 million as revenue and R!&00"000 as cost.
p. Royalty income can be recognised on the #3s sold i.e. R!10 x *00"000
R!*million.
2. /or 4rapes" it is not sales but borrowing.
r. Recognise revenue related to the four issues only" R!*"000 x *'12 R!1",,,.
s. Revenue can be recognised after the installation is completed i.e. in x(.
t. Revenue is recognised based on work done. -ne method is to determine percentage
of work done based on cost to date bear to total estimated cost. %n this case" can
recognise revenue of 2.5'( x R!10 million R!* million.
u. R!*0"000 can only be recognised on delivery of the perfume in /ebruary x(.
6owever" can recognise revenue of R!&0"000 on sale of perfume to Ruby 6otel.
v. 7o sales revenue to be recognised until the concert is held. +mount received is a
liability as at end of x) and cost incurred is prepaid expenses.
w $his is a long8term contract and revenue is recognised based on percentage of work
done. %n this case R!5 million cost of the estimated total cost of R!20 million was
incurred to date. $herefore revenue recognised for the year can be based on cost
incurred bear to total estimated cost which is 5'20 *0%. Revenue of *0% x R!25
million of R!10 million can be recognised. #ost to be recognised is R!5 million.
$herefore gross profit for the period is R!2 million.
FRS for Malaysia 3
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ed Lazar & Huang &(
FRS 118 Revenue
x %t is not sale but a borrowing of R!10 million.
2
Revenue can be recognised when the services are provided" that is when the tour is
completed.
,9a:
i. Recognise revenue when services are provided. 3eposit is treated as liability till
services are provided.
ii. Recognise revenue and cost based on percentage of completion method.
iii. Revenue is recognised based on the games played during the year.
iv. Registration fees to be recognised immediately" refundable deposit is a liability and
the fees can be recognised as revenue as it becomes payable.
v. $he fees charged can be allocated over the average period the member will en.oy
the club;s facilities.
,9b:
i. Revenue of R!&"&00 can be recognised on sale. %t is a sale and hold transaction
where the risks have passed to the customer.
ii. !alacca $raders can recognise sale when the customer takes possession of the
anti2ue only.
iii. Revenue to be recognised although full payment is not made. %t is instalment sales.
iv. #ommission can be recognised when the loan arrangement is finalised.
v. Revenue is recognised when the decoration services are provided in !arch x10.
.
*
RM000
0ales made for the year to ,1 3ecember x5 100"000
0ales value of timber flooring fitted in the two
months to 25 /ebruary x5 9not included in the
R!100 million above:
5"000
105,000
5
<roperty is at times sold with the seller being involved with its operations. %n this case the
risks and rewards are not transferred to #on2uest. $weed has guaranteed a minimum
payment to #on2uest and at the end of 10 years the resort reverts to $weed. $he
transaction is in substance a financing arrangement and the proceeds should be treated as
a loan and the profits as interest and capital repayment.
FRS for Malaysia 3
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FRS 118 Revenue
&
=#ustomer loyalty programmes; re2uire revenue in respect of each separate component of
a transaction is measured at its fair value. Revenue for the period will be reduced by the
fair value of vouchers issued as part of a sales transaction.
+s only one fifth of the vouchers will be redeemed the company effectively sold
R!1"200"000 for a consideration of R!10 million. $he discount of R!200"000 is
allocated between the two elements. 0ales revenue for the year will be R!10"000"000 x
910>10.2: R!)"50,")21. $he balance of R!1)&"0() will be allocated to the vouchers
and recognised when the obligations are met.
(
#omputer company?
Revenue on sale can be recognised on delivery of the computer provided the installation
is successful. Revenue of that could be recognised should be R!1"&00 being R!,.&00
less R!2"*00 i.e. internet service charge for 2* months.
%nternet service provider?
$he R!2"*00 will initially be recognised as deferred credit and amortised over 2*
months and recognised as income as service is provided. $he payment of R!*00 can be
charged as expenses when the contractor has provided the services.
3ana?
3ana can recognise the R!*00 on completion of the installation of the internet services.
FRS for Malaysia 3
rd
ed Lazar & Huang &)