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Graded Discussion Board

Financial Accounting II (MGT401)


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This is to inform that Graded Discussion Board (GDB) No. 02 will be opened on February 13, 2015 for discussion and last date for posting your discussion will be February 17, 2015.

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Topic: IAS-18 (Revenues)

IAS-18 deals with revenue, revenues recognition process and what to recognize and when to recognize? Different hypothetical situations that are near to real time circumstances of corporate world are given below. Read them carefully and highlight the amount of revenue(s) that should be recognized as per IAS-18 for each case separately:

  1. Delux company’s famous brand is ‘Xelon’ bearing retail price of Rs. 117 and prevailing general sales tax (GST) rate is 17%. The Company sold 100,000 units of ‘Xelon’ this year.
  2. Gross revenue of XYZ Company is Rs. 10 Million for the year 2014 whereas, Ledgers accounts of company are showing Rs. 2 Million discount offered to customers due to seasonal promotion.
  3. BCC Company is providing supplies to its corporate customers. A customer purchased the supplies of Rs. 2 Million and promised to clear his liability in one year. Prevailing discount rate is 16%.

Note: The answer of each question should not exceed 40 words.

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Views: 3453

Replies to This Discussion

where is its solution yarrr :'(

plz upload this GDB solution..........

plzzzzzzzzzz koi answer explain kr dyn 

read lect 34..

Definition – IAS 18 • The IAS defines Revenue as ‘Revenue is the gross inflow of economic benefits during the period arising in the course of ordinary activities of an entity when those inflows result in increases in equity, other than increases relating to contributions from equity participants. Identification of Transaction Normally, each transaction can be looked at as a whole. Sometimes, however, transactions are more complicated, and it is necessary to break a transaction down in to its component parts. For example, a sale may include the transfer of goods and the provision of future servicing, the revenue for which should be deferred over the period the service is performed. At the other end of the scale, seemingly separate transactions must be considered together if apart they lost their commercial meaning. An example would be to sell an asset with an agreement to buy it back at a later date. the second transaction cancels the first and so both must be considered together. Measurement of Revenue – IAS 18 • Revenue shall be measured at the fair value of the consideration received or receivable. • When the flow of cash or cash equivalent is deferred (eg. supplier credit) the fair value of the consideration may be less than the nominal amount of cash received or receivable. • The future cash flows are discounted at market interest rates and the present value is treated as the consideration whereas the difference of the present value and nominal values of cash flows is treated as finance income. • When goods are sold or services are rendered in exchange for dissimilar goods or services, the exchange is regarded as a transaction which generates revenue. • The revenue is measured at the fair value of the goods or services received, adjusted by the amount of any cash or cash equivalents transferred. • When the fair value of goods and services received cannot be measured reliably, revenue is measured at the fair value of the goods or services given up, adjusted by the amount of any cash or cash equivalents transferred. Matching should be take place, i.e. the revenue and expenses relating to the same transaction should be recognized at the same time. It is usually easy to estimate expenses at the date of sale (e.g. warranty costs, shipment costs, etc). Where they cannot be estimated reliably, then revenue cannot be recognized; any consideration which has already been received is treated as a liability. Sale of Goods - IAS 18 • Revenue from the sale of goods shall be recognized when all of the following conditions are satisfied; a) The entity has transferred to the buyer the significant risks an rewards of the ownership of goods; © Copyrights Virtual University of Pakistan Financial Accounting-II – MGT401 VU 160 b) The entity retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold; c) The amount of revenue can be measured reliably; d) It is probable that the economic benefits associated with the transaction will flow to the entity; and e) The costs incurred or to be incurred in respect of the transaction can be measured reliably. Rendering of Services - IAS 18 • When the outcome of a transaction involving rendering of services can be estimated reliably, revenue associated with the transaction shall be recognized by reference to the stage of completion of transaction at the balance sheet date. The outcome of the transaction can be estimated reliably when all of the following conditions are satisfied; a) The amount of revenue can be measured reliably b) It is probable that economic benefits associated with the transaction will flow to the entity; c) The stage of completion of the transaction at the balance sheet date can be measured reliably; and d) The costs incurred for the transaction and the costs to complete the transaction can be measured reliably. Interest, Royalties and Dividends - IAS 18 • Revenue arising from the use by other entity assets yielding interests, royalties and dividends shall be recognized on the bases set out in the next paragraph (next slide) when; a) It is probable that economic benefits will flow to the entity; and b) The amount of revenue can be measured reliably. • Revenue shall be recognized on following bases; a) Interest shall be recognized using effective interest method as set out in IAS 39 b. Royalties shall be recognized on an accrual basis in accordance with the substance of the relevant agreement; and c. Dividends shall be recognized when the shareholders right to receive the payment is established Disclosure - IAS 18 • An entity shall disclose; a) The accounting policies adopted for the recognition of revenue, including the methods adopted to determine the stage of completion of transitions involving rendering of services; b) The amount of each significant category of revenue recognized during the period including revenue arising from; i) The sale of goods; ii) The rendering of services; iii) Interest; iv) Royalties; v) Dividend; and c) The amount of revenue arising from exchanges of goods or services included in each significant category of revenue.


The amount of money that a company actually receives during a specific period, including discounts and deductions for returned merchandise. It is the "top line" or "gross income" figure from which costs are subtracted to determine net income.

Revenue is calculated by multiplying the price at which goods or services are sold by the number of units or amount sold.

Revenue is also known as "REVs."

Revenue is the amount of money that is brought into a company by its business activities. In the case of government, revenue is the money received from taxation, fees, fines, inter-governmental grants or transfers, securities sales, mineral rights and resource rights, as well as any sales that are made.

  1. Revenue= 100000*117= 11700000
  2. Revenue= 10000000-200000= 9800000
  3. Revenue= 2000000*16%= 320000 so 2000000-320000= 1680000

thanxxx for shuring Abdul Manan

manaan bhai love you

u know me ali hassan bhaii ?????

manaan bhai yes u r the gr8 man

 Abdul Manan bhai thora guide bhi krdijyay k kaisay kia ..

kuch text bhi add karna h na gdb may..

80 nahi 8million
10million minus 2 million


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