IFRS 15 REVENUE – SALE OF PRODUTS AND
SERVICE
When to recognize sale of product?
Sale of product is recognized “at a point of time” i.e,when seller transfers
significant risk and reward to the buyer. Seller transfers title of the goods to the
buyer. Title is transferred when the goods is delivered to the buyer.
When to recognize sale of service?
Sale of service is recognized “over a period of time”.
Combo offer
When there is combo offer, the reduced amount is proportionally divided among
individual products and services.
Consignment sale
PRINCIPAL ---------------------AGENT------------------------THIRD PARTIES
REVENUE RECOGNITION IN THE BOOKS OF PRINCIPAL
 When the agent sells goods to third parties.
 Inventories/receivables are recorded in the books of the principal.
 The revenue that is recognized by the agent is the commission received
on the sale of goods/services to third parties.
Sale on approval/return basis
In this type of sale the buyer has an option either to accept the product or return
it back to the buyer within a specific period. If the product is not returned by the
buyer within the time period, it is assumed that the seller has accepted the
product.
REVENUE RECOGNITION IN THE BOOKS OF SELLER
Sale is recorded in the books of the seller on the earliest of the following dates:
On approval
On the expiry of the time period for return back.
Factoring arrangement
It is the sale of receivable. There are two types of factoring:
Without recourse: Risk of bad debt is transferred to factor
With recourse: Risk of bad debt is not transferred to factor
JOURNAL ENTRIES
WITHOUT RECOURSE
DR. Cash
DR. Administrative expense/operating expense
CR. Receivables
WITH RECOURSE
DR. Cash
CR. Loan (Financial liability)