As noted above, these examples of implementation accompany IAS 18, but are not part of it. However, they are useful for application and need to be reviewed. They expect that revenues and related costs can be reliably measured and that economic benefits will likely be paid to the seller. Most of the examples are relatively self-explanatory. We will look at two of the most complex examples: 5 – Sale and repurchase (15) When products are “sold” under conditions that require the seller to buy them back in the future or that include buyback options that are likely exercised, the content of the transaction is often the “sale” that it is in fact a subsidy. Suppose entity A “sold” On January 1, 2013, the goods for $400,000 to Company B. Products are stocks that must mature for five years before being ready for sale. Their market value as of January 1, 2013 was $800,000 and Company A has the option to repurchase the goods from Company B on January 1, 2018 for $600,000. The market value of products is expected to increase by 5% per year between 2013 and 2017 included. Company A`s credit quality is such that it would have to pay interest of 8.447 per cent per annum on bonds. The goods are expected to remain on Company A`s premises for the five-year period beginning January 1, 2013 and Unit A will be responsible for their conservatory conservation. The factual model of this example shows that at least two of the conditions for recognizing revenue from the sale of goods are not met: forums – Ask ACCA Tutor Forums – Questions in ACCA SBR reviews – Buyback Contracts Answer: “The sale of land should not be recognized in the accounts, because the risks and rewards of the property have not been transferred.
The land can be redeemed at the sale price plus a premium which is in fact an interest payment. It effectively manipulates the conclusion to show a better cash position. Prior to the transaction, the country is expected to be reinstated in its book value of $12 million, a current liability of US$16 million and the profit from the sale of $4 million, which has been reversed. Question 1a: Could you explain why the following transaction is not considered a pension transaction? On the basis of IFRS 15, the repurchase transaction should be treated as a financing agreement that does not generate revenue.