Page 8 - FINAL CFA I SLIDES JUNE 2019 DAY 7
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Instalment Sales (US GAAP versus Session Unit 7:
IFRS), p45 24. Understanding Income Statements
Instalment Method:
Profit = Expected 20% * Collections $80 $80 $40 $200
Cost Recover Method: tanties
Profit = Expected 0% * Collections $0 $0 $200 $200
Receipts applied to cost recovery until end!!
• Used when project cannot be reliably estimated!
Under IFRS,
• Discounted PV of the instalment payments is recognized at the time of sale.
• Difference between the instalments and the discounted PV is recognized as interest over time.
