IAS 18 Assignment Example | Topics and Well Written Essays - 2000 words - 1

IAS 18 - Assignment Example According to IAS 18, revenue is simply the gross inflow of financial benefits (receivables, cash, and other assets) emanating from the normal operating activities of a business (like sales of services, sales of goods, royalties, dividends and interest) (Elliott & Elliott 2013 ). Accordingly, an exchange for services or goods of a comparable value and nature is not considered as a transaction that yields revenue. Though, exchanges for dissimilar goods and services are considered as revenue generation. Question Two IAS 18 outlines the underpinning principles for the recognition criteria for Revenue in three different parts. Identify each of the three parts and discuss the recognition criteria for each part. Basing on the above statement, there is a dissimilar approach taken to the realization or recognition of revenue particularly from the services that have been provided ( Holt, Tweedie, & Richard 2013). In short, instead of realizing the revenue at one point such as the sale of goods, it should be realized gradually. According to IAS 18, in order to estimate the outcome of a transaction reliably the following conditions are met: IAS 18 indicates the need to measure revenue at the fair value of the consideration received (Greuning 2001). However, in the case where the consideration or payment is deferred, the arrangement will constitute the substance of the transaction and a financing transaction. In such situations, the amount receivable is classified into: The key challenges associated with the implementing of IAS 18 Revenue is that its principles for revenue recognition are quite broad. In addition, under IAS 18, there is clarity on how to recognize revenue. Professional bodies have introduced the principle of IFRS 15 ( Bragg 2011). With this principle, a business recognizes revenue to show the transfer of services or goods to clients. In addition, it reflects the payment to