2. ©2006 EFRAG BRUSSELS 18. OCTOBER 2006 REVENUE RECOGNITION Examples Stig Enevoldsen 18 October 2006

3. ©2006 EFRAG BRUSSELS 18. OCTOBER 2006 Revenue The chair handed over to the customer and cannot be returned Chair handed over, but can be returned (department store) TV handed over and paid but entire revenue can be returned on demand after 10 years Revenue recognition ?

4. ©2006 EFRAG BRUSSELS 18. OCTOBER 2006 Revenue Bonds sold and handed over and buy back commitment (securitisation)? Aeroplane or ship sold but can be sold back after 6 years for say 55% of the price Revenue recognition ?

5. ©2006 EFRAG BRUSSELS 18. OCTOBER 2006 Revenue Goods or software license invoiced and handed over to agent but can be given back Goods sold and handed over but price decided when the goods are sold on to the final customers Revenue recognition ?

6. ©2006 EFRAG BRUSSELS 18. OCTOBER 2006 Revenue Alternatives: 1 Revenue and provision 2 Defer revenue until completed contract 3 Matchning/ earnings

7. ©2006 EFRAG BRUSSELS 18. OCTOBER 2006 REVENUE Invoice Matching Completed ? Revenue and provision Revenue when completed

8. ©2006 EFRAG BRUSSELS 18. OCTOBER 2006 Revenue IT-firm sells License to software Hardware Service (3 years) Conditions License from 1st Jan but CD-Rom there Hardware there Service from 1 jan ???

9. ©2006 EFRAG BRUSSELS 18. OCTOBER 2006 Revenue Hardware Service Licens

10. ©2006 EFRAG BRUSSELS 18. OCTOBER 2006 Revenue IT-firm sells License to software Hardware Service (3 years) Potential upgrade Conditions License from 1st Jan but CD-Rom there Hardware there Service from 1 jan Only if made available ???

11. ©2006 EFRAG BRUSSELS 18. OCTOBER 2006 Revenue Hardware Service Licens Upgrade???

12. ©2006 EFRAG BRUSSELS 18. OCTOBER 2006 Revenue Sub-supplier Contract with customer signed, and sub-supplier will deliver immediately Sub-s will deliver in a month Sub-s will have to produce Revenue recognition ?

13. ©2006 EFRAG BRUSSELS 18. OCTOBER 2006 Revenue PHONE UP A/S (Earns up to 60% of first years fee)

14. ©2006 EFRAG BRUSSELS 18. OCTOBER 2006 Revenue Call to customer Customer payment Fee earned per month the customer stays with client Fee earned after 9 / 15 months 36% cash received upfront 4% earned per month the customer stays Right to 36% non- refundable after 9 months 60% after 15 month

15. ©2006 EFRAG BRUSSELS 18. OCTOBER 2006 PHONE-UP Payment request and 36% fee paid Call and accept Customer payment? 13 weeks follow up 36% earned if paid 15 months 60% earned if paid 9 m RETURN ?

16. ©2006 EFRAG BRUSSELS 18. OCTOBER 2006 Revenue Call and Payment 15 completed Customer accept Performance obligation and rights to consideration

17. ©2006 EFRAG BRUSSELS 18. OCTOBER 2006 Revenue - measurement Telecom sells Mobile phone Connection Stay at least 6 m Conditions Mobile 1 Normal price for the calls ???

18. ©2006 EFRAG BRUSSELS 18. OCTOBER 2006 EFRAG Avenue des Arts 13-14 1210 Brussels Belgium WWW. EFRAG.ORG