Page 175 - F2 Integrated Workbook STUDENT 2019

Revenue from contracts with customers

Financing

To encourage sales of high ticket items, such as:

 cars

 furniture

 computer systems,

businesses often allow customers to pay more than a year after receiving the goods
or services.

It is considered that these transactions include elements relating to both the physical
sales of the goods/services and the financing arrangement included in the sale.

Initial recognition

The revenue recognised initially needs to be discounted to present value using the
rate at which the customer borrows money.

Dr Receivable With discounted

Cr Revenue selling price

Subsequent treatment

Record the interest income from providing finance over time.

Dr Receivable

Cr P/L

167