Revenue and other income

Transcription

1 Revenue and other income MPERS Conversion steps Determine functional currency Select accounting policies Identify gaps Apply transitional provisions where applicable (Section 35) Restate opening balances and comparatives MPERScompliant financial statements 2015 KPMG, a partnership established under network of 1

2 Agenda Statement of profit or loss items Revenue Government grants Overview Revenue Sale of goods Rendering of services Interest Royalties Dividends Significant risks + rewards of ownership transferred to buyer Seller does not retain managerial involvement or control over goods sold Revenue and costs can be measured reliably Probable that economic benefits will flow to the entity Stage of completion Time proportion using effective interest method Substance of agreement Right to receive 3

3 Revenue for separately identifiable components Specific guidance on customer loyalty award Sell goods + loyalty points Retailer Buyer Payment received = RM1,000 Fair value of goods sold = RM1,000 Fair value of loyalty points = RM50 Relative fair value = RM952 = RM48 Recognise as revenue upon delivery of goods. Deferred income; recognise as revenue when loyalty points are claimed by buyer or upon expiry. 4 Revenue for separately identifiable components Specific guidance on exchange of goods Retailer Sell goods Receive goods Buyer Can fair value of goods received be measured reliably? Yes No Measure based on fair value of goods received Measure based on fair value of goods given up Measure based on carrying amount of the asset given up adjusted by the amount of any cash or cash equivalents transferred If neither fair values can be measured reliably 5

4 Accounting for construction contract When outcome of a construction contract cannot be estimated reliably Variation Claim Incentive payment PERS MASB 7 Revenue is recognised only to the extent of contract costs incurred that is probable will be recoverable. Contract costs are recognised as an expense in the period in which they are incurred. Included in contract revenue when: it is probable that customer will approve the variation; and the amount can be measured reliably. Included in contract revenue when: negotiations have reached an advanced stage that it is probable that customer will accept the claim; and the amount can be measured reliably. Included in contract revenue when: it is sufficiently advanced that it is probable that the specified standards will be met or exceeded; and the amount can be measured reliably. MPERS No explicit guidance. In our view, Private Entities may refer to MFRS 111, Construction Contracts which contains similar guidance as PERS. 6 New revenue standard for MFRS is complex Standards IAS 11 IAS 18 Interpretations IFRIC 13 IFRIC 15 IFRIC 18 SIC 31 Notes PO: Performance obligation TP : Transaction price The NEW Revenue Recognition Model 1 Contract 2 Performance Obligation 3 Transaction Price 4 TP allocated to PO 5 Revenue on PO 7

5 Agenda Statement of profit or loss items Revenue Government grants Government grants Key changes in MPERS MPERS Recognition Recognised as income when conditions are met. Nil or low interest rate government loan is considered part of government grant. Difference between fair value and loan proceeds is accounted for as government grant. 9

6 Recognition and measurement Recognition Government grants are recognised as income when conditions are met. Grants received are initially measured at the fair value of the asset received or receivable. Are there any future conditions? No Yes Recognise as income immediately. Recognise as income only when the conditions are met. 10 Recognition and Measurement Example: Presentation of grants related to assets Government Company A Company A receives a cash grant of RM50,000 upon completion of the construction of a plant (depreciate over 5 years). There are no other conditions attached to the grant. PERSapproach #1 PERSapproach #2 MPERS Year 1 Statement of financial position Property, plant and equipments 200, , ,000 Deferred income (50,000) Profit or loss Other income (50,000) Year 2 Statement of financial position Property, plant and equipments 160, , ,000 Deferred income (40,000) Profit or loss Other income (10,000) Depreciation 40,000 30,000 40,000 11

7 Government grants Key changes in MPERS Recognition Nil or low interest rate government loan is considered part of government grant. Difference between fair value and loan proceeds is accounted for as government grant. Fair value of government loan shall be recognised in accordance with Section 11 Basic Financial Instruments and Section 12 Other Financial Instruments Issues or MFRS 139 Financial Instruments Fair Value of Government Loan Loan Proceeds Government Grant RM800,000 RM1,000,000 RM200, Government grants Key differences between MPERS and MFRS Recognition & measurement MPERS Recognised as income when conditions are met. MFRS Grants related to asset may be presented as deferred income or deduct against the cost of the asset. ** Grants related to income may be presented as other income or setoff against related expenses. ** ** Similar requirement with PERS. 13

8 Government loans Transition to MPERS 2015 A Government loans that exist as at the date of transition requirements in Section 11, Section 12 and Section 24 to be applied prospectively. If in the previous GAAP, measurement differs with current requirement, entity treats carrying amount as at transition date as the carrying amount of the loan and shall not recognise any benefit of the government loan. 14 End of Revenue and other income

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