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Revenue recognition for taxes/service taxes

21 July 2010 1,871 views 2 Comments

when we are paying taxes and subsquently recovering from customers, Can we net off and remaining can be shown as expenses.
Do we need to show both lines seperately collection as revenue and payment as expenses

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2 Comments »

  • patriciawalters said:

    No, you cannot include these amounts as revenue.

    See paragraph 8 in IAS 18:

    8 Revenue includes only the gross inflows of economic benefits received and receivable by the entity on its own account. Amounts collected on behalf of third parties such as sales taxes, goods and services taxes and value added taxes are not economic benefits which flow to the entity and do not result in increases in equity. Therefore, they are excluded from revenue.

    Regards
    Patricia Walters

    # 21 July 2010 at 9:09 pm
  • riyer0018 said:

    No. Don’t gross up since taxes are not received in the capacity of a Principal. In other words, the company is an agent of the goverment and therefore, can’t show such tax collections as part of its revenue.

    Show the net (Collection-Expenses)as an Expense/Other Income, as is appropriate.

    # 16 August 2010 at 8:00 am

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