2. Objective Income is defined in the Framework for the Preparation and Presentation of Financial Statements as increases in economic benefits during accounting period in the form of inflows or enhancement of assets or decreases of liabilities that result in increases in equity, other than increases relating to contributions from equity participants. Income includes both revenue and gains. Revenue is income that arises in the course of ordinary activities of an entity and is referred to by a variety of different names including sales, fees, interest, dividends and royalties The primary issue is determining when to recognize revenue, usually it is recognized, when: -it is probable that future economic benefits will flow to the entity -benefits can be measured reliably

3. Scope Under the International Accounting Standard 18, Revenue shall be applied in accounting for revenue arising from the following transactions and events: (a) the sale of goods; (b) the rendering of services; and (c) the use by others of entity assets yielding interest, royalties and dividends. The use by others of entity assets gives rise to revenue in the form of: (a) interest—charges for the use of cash or cash equivalents or amounts due to the entity; (b) royalties—charges for the use of long-term assets of the entity, for example, patents, trademarks, copyrights and computer software; and (c) dividends—distributions of profits to holders of equity investments in proportion to their holdings of a particular class of capital.

4. This Standard does not deal with revenue arising from: (a) lease agreements (see IAS 17 Leases); (b) dividends arising from investments which are accounted for under the equity method (see IAS 28 Investments in Associates and Joint Ventures); (c) insurance contracts within the scope of IFRS 4 Insurance Contracts; (d) changes in the fair value of financial assets and financial liabilities or their disposal (see IFRS 9 Financial Instruments); (e) changes in the value of other current assets; (f) initial recognition and from changes in the fair value of biological assets related to agricultural activity (see IAS 41 Agriculture); (g) initial recognition of agricultural produce (see IAS 41); and (h) the extraction of mineral ores.

5. Definition Revenue is the gross inflow of economic benefits during the period arising in the course of the ordinary activities of an entity when those inflows result in increases in equity, other than increases relating to contributions from equity participants. Amounts collected on behalf of third parties are not economic benefits which flow to the entity and do not result in increase in equity and excluded from revenue: - Sales Taxes - Goods and Services Taxes - Value Added Taxes The amounts collected on behalf of the principal are not revenue. Instead, revenue is the amount of commission.

6. GAAP vs. IFRS Similarities in Revenue Recognition: -Tied to the completion of the earnings process and realization of assets from such completion -Represents actual or expected cash inflows that have occurred or will result from the entity’s ongoing major operations -Revenue is not recognized until it is both realized and earned -Both have revenue recognition on the transfer of risks -Determine when the earnings process is complete -Under IFRS, recognition criterion is that amount of revenue can be measured reliably -Under US GAAP requires that the consideration to be received form the buyer Is fixed or determinable Differences -US GAAP is very prescriptive and often applies only to specific industries ( specific rules for the recognition of software revenue, sales of real estate), which does not exist in IFRS -Under US GAAP, exceptions for particular types of transactions -Public companies must follow additional guidance provided by SEC staff

7. US GAAPIFRS Sale of Goods - Public companies must follow SAB 104, Revenue Recognition - Delivery has occurred -there is an evidence of sale -The fee is fixed or determinable - collectability is reasonably assured -Risks and rewards of ownership has been transferred -Buyer has control of the goods -Revenues can be measured reliably -It is probable that the economics benefits will flow to the company Rendering of Services - Service Revenue relating to services sold with software addressed separately ( follow SAB Topic 13) - Application of long-term contract accounting is not permitted for non-constructive services. -Revenue is recognized in accordance with long-term contract accounting, including considering the stage of completion, whenever revenues and costs can be measured reliably and it is probable that economic benefits will flow to the company.

8. US GAAPIFRS Multiple Elements Specific criteria are required in order for each element to be separate unit of accounting, including delivered elements must have standalone value. Revenue for each element of the transaction may be recognized when the element is complete. IAS 18 requires recognition of revenue related to an element of a transaction if that element has commercial substance on its own; otherwise, the separate elements must be linked and accounted for as a single transaction. Deferred receipt of receivables Discounting to present value is required only in limited situations. Considered to be a financing agreement. Value of revenue to be recognized is determined by discounting all future receipts using an imputed rate of interest. Construction Contracts Using the percentage-of-completion method if certain criteria are met. Otherwise, the complete contract method is used. Using the percentage-of-completion method if certain criteria are met. Otherwise, revenue recognition is limited to recoverable costs incurred. The completed contract method is not permitted.