Revenue recognition

This query is : Resolved

Resmi Raj (Querist)
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12 March 2015 During 2014, a Company has signed purchase incentive agreement with Samsung (the “supplier”). According to the agreement, the Company will be entitled to discount of 2% on purchases if the Company achieves the following quarterly purchase targets during 2015.

Management is quite certain to meet the purchase targets of 2015 as management has achieved all purchase targets with the supplier in the previous years. So they need to recognise the revenue during 2014.

Is there any standards admitting that?

The company saying, as per IAS 18, para 7,8 and 10; they can recognise revenue in 2014.

Kindly advise.

CS,CA F,Numrologi TusharSampat

CS,CA F,Numrologi TusharSampat (Expert)
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12 March 2015 AS per as 9 on revenue recognition, in this case income needs to be booked in 2014 but also a suitable provisions need to be made for uncertaininty of amount not recievable in 2015 in case the targets are not achieved.

then in 2015 if targets are not achieved then provision should not be reversed but if targets are achieved then provision entry must be reversed so net effect will be correct

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