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Refund of earned income

10 December 2009 1,747 views 6 Comments

How to treat the income which was earned and accounted in 2007, which is being partly refunded in 2009.

The organisation had legal rights to the income and there was no error in accounting, so it is not a prior period item and there is no changes in the accounting policy.  The income is just being refunded this year to keep the good faith and relations of certain parties.

Appreciate comments on the same.

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6 Comments »

  • ifrsexpert said:

    It’s true that the IAS 8 treatment specifies only prior period errors and changes in accounting policy, but it seems to me (and this is my personal opinion) that the spirit of IAS 8 is to avoid polluting the current year’s bottom line with elements that would have been accounted for in previous year(s) results if they’d been known about at the time. After all, if you had known about this problem back in 2007, you’d have applied IAS 37 and provided for it. So I think you should apply IAS 8 now. Happy to be proved wrong by any other expert out there :-)

    # 11 December 2009 at 9:18 am
  • riyer said:

    This amounts to change in accounting assumption/estimate. In 2007,there was no intention of refunding this amount. Consequently,no need to restate accounts of 2007. Just debit your revenue of 2008 with the amount refunded.

    # 22 December 2009 at 10:11 am
  • riyer said:

    Read 2008 as 2009.oops

    # 22 December 2009 at 10:12 am
  • purudate said:

    Revenue is recognized as the fair value of consideration received or receivable. This substantiates receipt of cash or cash equivalent.

    Return of earned income might be due to two specific conditions (1) Billing error and its rectification has triggered customer refund (or) (2) Return of goods or rejection of services.

    A word of caution: please keep yourself away from the influence of IFRS. Now, recall how you record credit notes/memos. In the accounting period in which credit note is recognized and measured. So, no need to restate past records.

    # 26 January 2010 at 8:11 am
  • ifrslist
    ifrslist said:

    [New Post] Refund of earned income – http://www.ifrslist.com/2009/12/refund-o...
    via Twitoaster

    # 29 January 2010 at 9:54 am
  • Loh said:

    1) Meaning something wrong on your revenue recognition criteria.

    2) Where it come how it shall go example, revenue account.

    3) Material or not, if yes, why not restatement of prior year figures.

    # 30 April 2010 at 2:51 am

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