Page 54 - SBR Integrated Workbook STUDENT S18-J19
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Chapter 4
Financing
If there is a significant financing component, such as when the customer pays more
than a year after receiving the goods or services, then the consideration receivable
needs to be discounted to present value using the rate at which the customer
borrows money.
Example 4
Financing
Pot sells state-of-the-art scientific equipment to Vase on 31 December 20X1
for $4 million. Vase is not required to settle the invoice until 31 December
20X4.
Vase can borrow money at a rate of 5%.
How should the above transaction be accounted for in the year ended 31
December 20X1?
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