Does revenue discounted to cash basis at initial recognition need to be subsequently measured for changes in market interest rates for interest-free credit sales transactions?
IAS 18.11 revenue discounting – http://www.ifrslist.com/2010/09/ias-18-1…
I’m exactly not sure what you mean by “discounted to cash basis” but no, revenue cannot be subsequently remeasured.
Even the net receivable need not be (under normal circumstances) remeasured. The effective interest method is applied to the deferred revenue as measured on the original transaction date.
Accounting of exchange difference.
Purchase is booked at spot rate on the date of Bill of lading – Rs.45
Forward cover spot rate is Rs.46.00
Forward cover premium is Rs.Rs.1.00
Month End spot rate is Rs.48.00
a. Receivables will be disclosed at what rate.
b. Whether premium will be charged off or proportionately based on the forward cover contract.
c. The exchange difference between BL spot rate and FC spot rate how it will be treated.
d. The re-instatment between FC rate and Month End rate how this will be treated.
Cash discounts, if this is what you mean, can be reported as a deduction from sales. See Roche Holding report and accounts for the year ending 31 Dec 2003 for an example.
If some customers pay for their goods via a term loan, which has a variable rate of interest linked to ‘market rates’ you will need to set up a financial asset and measure it at amortised cost using the effective interest rate over the expected (not contractual) life of the loan (see IAS 39). You will also need to test the variable ‘market rates’ to make sure that the embedded derivative does not need to be bifurcated. At the end of each reporting period you will need to re-measure the loan balance at amortised cost using the variable rate. This approach can in effect result in the loan balance being fair valued at the end of each reporting period.
Finally you will also need to factor in an incurred loss impairment model for your portfolio of loans to customers.
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