AFM391 Lecture Notes - Lecture 6: Current Liability, Spot Contract, Income Statement
28 Jun 2018
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Professor
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Discount vouchers (coupons)
b.
The transaction price is allocated to the performance obligations on the basis of relative stand
-
alone sales prices adjusted for the probability of exercise and any discount that would otherwise
be available
•
Revenue is recognized for the voucher obligation when the future goods or services are delivered
or the option expires
•
Rebates
c.
A common form of rebate requires buyers to submit evidence of purchase to the manufacturer,
who then send the customer a cheque for the agreed upon amount.
•
Accounting for customer loyalty programs involves recognizing a separate performance obligation
for the award portion of the sale whereas accounting for rebates does not
•
The entity's obligation for rebates is typically estimated using expected value techniques and a
liability established for the amount it expects to refund
•
Reported as a current liability if the incentive can be redeemed at any time at the holder's
discretion
•
Other current liabilities
8.
Obligations denominated in foreign currenciesa.
Translation of the foreign currency debt into the functional currency at the exchange rate
evident on the transaction date
○
Revaluation of the foreign currency obligation at the end of a period using the exchange rate
at that time; and
○
Recognition of the gain or loss from revaluation in the income statement
○
The standard requires:
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Interest is charged to expense at the average rate for the period, rather than the spot rate paid at
the time of the payment. The difference is recognized as a gain or loss on the income statement.
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AFM 391 Page 11
Document Summary
The transaction price is allocated to the performance obligations on the basis of relative stand- alone sales prices adjusted for the probability of exercise and any discount that would otherwise be available. Revenue is recognized for the voucher obligation when the future goods or services are delivered or the option expires. A common form of rebate requires buyers to submit evidence of purchase to the manufacturer, who then send the customer a cheque for the agreed upon amount. Accounting for customer loyalty programs involves recognizing a separate performance obligation for the award portion of the sale whereas accounting for rebates does not. The entity"s obligation for rebates is typically estimated using expected value techniques and a liability established for the amount it expects to refund. Reported as a current liability if the incentive can be redeemed at any time at the holder"s discretion b. c.
