Non-refundable setup fees: what did the customer receive?
A non-refundable activation fee can still pay for future service. How to test setup activity under IFRS 15 and spread the fee when nothing separate transfers.
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Keep the books in order, plan for cash needs and understand reporting changes. Practical guides with worked examples and links to the evidence.
Accounting and finance blog
150 articles
Stand-alone selling prices: the list price needs support
Why a list price cannot simply be presumed to be the stand-alone selling price under IFRS 15, and what evidence supports splitting a bundled equipment sale.
Contract asset or receivable: what still has to happen before payment is due?
An earned balance can remain conditional after revenue recognition. Follow one milestone through contract asset, receivable and cash without recording revenue twice.
Idle production: use normal capacity before costing each unit
Low output does not justify putting every fixed factory cost into fewer units. A normal-capacity calculation separates inventory cost from unused-capacity expense.
Indirect cash flow: remove noncash changes before using balance movements
A stock write-down and an unpaid equipment purchase can distort an indirect cash-flow bridge. Reconcile the movements, then check against receipts and payments.
Offsetting receivables and payables: a shared counterparty is not enough
A net amount requires both an enforceable current set-off right and the intended settlement process. Test those conditions before combining customer and supplier balances.
Over-time revenue: wasted cost does not mean more work delivered
A cost-based progress measure must reflect performance transferred to the customer. Remove unexpected waste from the progress calculation while keeping its expense.
Owner funding: read the repayment obligation before calling it equity
Shareholder identity and share labels do not settle classification. Compare a demand loan, ordinary shares and mandatory redeemable preference shares under IAS 32.
Purchase rebates: split the saving between sold stock and inventory
An earned purchase rebate changes the cost of both sold and unsold units. Allocate it before treating the whole credit as this period's margin improvement.
Reducing leased space: record the termination before remeasuring the lease
A partial lease termination and the revised payment valuation are separate steps. Follow a space reduction through the right-of-use asset, liability and gain.
Sale and leaseback: recognise the gain on rights sold, not the whole uplift
A qualifying sale and leaseback retains some use of the asset. Separate that retained right from the rights transferred before measuring the recognised gain.
Supplier finance: reconcile what the business owes and what suppliers have received
The programme liability and the amount already paid to suppliers are different figures. Build the opening and closing disclosure from invoice-level records.