IFRS Income Statement Template is an example income statement prepared under IFRS reporting guidelines and hence it would make sense to discuss more about the revenue recognition policies used under IFRS. As you already may know revenue can basically arise from selling goods or rendering services. Gains (I would not call it \u201crevenue\u201d) can be earned from dividends, interests etc. While the policies surrounding different types of revenues are varying and fairly detailed in IFRS, we\u2019ll bring you the highlights and basic rules.
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\nEssentially revenue comprises the fair value of a consideration received (cash, asset etc) or receivable (remember the accounting is done on accrual basis) for the sale of goods and services in the ordinary course of the company\u2019s activities. Revenue is obviously shown net of VAT, any returns, rebates and discounts. In case of any rebates and discounts always the historical experience should be taken into account when estimating those deductions from sales revenue. But that\u2019s the easy part.<\/p>\n
Revenue is only recognized when the amount can be reliably measured; it is probable that future economic benefits will flow to the company and when specific criteria for each type of revenue stream have been met. For an example in case of sale of goods the specific criteria points out the necessity to transfer all rights and obligations to the client meaning that no outstanding liabilities remain. Usually the delivery time is also important and in here also the INCOTERMS apply. When revenue from services can be easy in case of short term rendering \u2013 if service is provided, you account for the income; in case of long term services something called \u201cpercentage-of- completion method is used\u201d. Without getting into too much detail with this more advanced method I would just like to point out that this method basically works with one main rule \u2013 revenue is recognized in the same period when the relevant expenses incurred. As for the dividends, their income is recognized when the right to receive payment is established. Interest income is recognized using the effective interest method, again something we\u2019ll come to later on in our posts.<\/p>\n
Our IFRS Income Statement Template includes lines like \u201cRevenue\u201d and \u201cFinancial Income\u201d designed just for those revenue and gain streams. You can easily remove or add your lines depending on your local GAAP and industry.<\/p>\n