IFRS Income Statement Template, an example income statement prepared under IFRS reporting guidelines includes a line called “Revenue”. What it is and how is this disclosed on the income statement? What are the relevant notes that are required by IFRS? With this post I’ll try to answer to those questions.
First, revenue is usually the main source of profits. I say main because some asset based companies for an example have no business operations since they earn their profits through earnings made from investments. No revenue stream as one would expect is earned in those companies, hence I said “usually the main source”. Essentially revenue on the income statement represents cash inflows and receivable balances booked during a period from delivering or producing goods or rendering services. Since accounting in most countries and companies is made on accrual basis, recording revenue does not necessarily mean that the cash needs to be received. If all rights and obligations have passed from the company as a seller to its client, a sale can in most cases be booked into the accounts (Debit: Receivable balance from client, Credit: Revenue). Note that all discounts, returns and allowances are deducted from sales and hence are disclosed on the income statement as part of revenue. Note also that in case a sales tax or VAT is charged on the sale, it is not presented as a part of revenue because this is not something the company has earned. This is a tax expense and should not increase company’s revenue.
Under IFRS segment information needs to be presented in the annual report in addition to revenue recognition principles used. While the principles are easier to disclose, the segment information is something more technical and more complicated to prepare. Essentially it should disclose how the management sees and has divided the segments inside the company, how those segments are measured and income statements by those segments. For significant changes compared to prior period results or changes arising from reporting requirements, the segment information also needs to include comments.
While the IFRS Income Statement Template is prepared to be as a summary of financial performance for the year, more detailed notes are required for revenue under IFRS reporting. Prepare those with due care.
useful for auditors