Significant financing component
According to the relevant provisions of the revenue standard, if the contract contains a material financing component, the enterprise shall:Excluding the impact of the material financing component contained in the contract price, the revenue is recognized according to the current sale**.
If the time between the transfer of goods or services by the enterprise to the customer and the payment by the customer does not exceed one year, the impact of the financing component existing in the contract may be disregarded;If it is more than one year, if the relevant facts and circumstances show that the payment time agreed in the contract does not provide a material financing benefit to the customer or enterprise in connection with the transaction of transferring goods or services, the contract shall be deemed to have no material financing component.
In some transactions, there may be a longer interval between the transfer of goods or services by the Company to the Customer and the collection of the goods.
[Case].
The Company is engaged in photovoltaic power generation business, and the time interval between the collection of the renewable energy feed-in tariff subsidy as part of the consideration for power generation revenue and the time when the Company connects to the grid for power generation and recognizes the power generation revenue may exceed one year.
[Case].
The Company is engaged in the production and sale of new energy vehicles, and the time interval between the collection of new energy vehicle subsidies as part of the consideration for the sale of new energy vehicles and the time when the Company sells new energy vehicles and recognizes revenue may exceed one year.
If the relevant facts and circumstances show that the main reason for the time interval is that the relevant state departments need to perform the relevant approval procedures, and the time interval is the necessary time to perform the above procedures, and its nature is not to provide financing benefits, it can be considered that there is no material financing component in the aforesaid renewable energy electricity price subsidies and new energy vehicle subsidies obtained by the Company.
Consideration payable to customers
According to the Accounting Standards for Business Enterprises and relevant regulations, if an enterprise pays a consideration to a customer (or a third party who purchases its goods from a customer), it shall offset the consideration payable against the transaction**, and reduce the current income at the later point when the relevant income is recognized and the consideration paid (or promised to be paid) to the customer, butUnless the consideration payable to the customer is for the purpose of obtaining other clearly distinguishable goods from the customer.
If the consideration payable by an enterprise to a customer is to obtain other goods from the customer that can be clearly distinguished, it shall confirm the purchased goods in a manner consistent with other purchases by the enterprise.
If the consideration payable by the enterprise to the customer exceeds the fair value of the goods that can be clearly distinguished from the customer, the excess amount shall be offset by the transaction**. If the fair value of the clearly distinguishable commodity obtained from the customer cannot be reasonably estimated, the enterprise shall offset the full amount of the consideration payable to the customer for the transaction**.
According to the CSRC's 2020 Annual Report on Accounting Supervision of Listed Companies, after signing a contract with a customer, individual listed companies pay the price to the customer as the initial cost of carrying out the contract according to the contract, or the price paid is used for the customer to display its goods, conduct advertising and marketing, etc., and the listed company will use the payment as the consideration payable to the customer and offset the transaction**.
If the customer provides the listed company with a clearly distinguishable commodity and the listed company obtains control of the commodity, it should generally be treated as a purchased commodity, and should not directly offset the transaction** or reduce the sales revenue.
Sales with a sales return clause
*Originated from the Internet).
According to the Accounting Standards for Business Enterprises and relevant regulations, for sales with sales return clauses, enterprises should obtain control of the relevant commodities when the customer obtains the right to control the relevant goodsRevenue is recognized at the amount of consideration that is expected to be entitled to be received as a result of the transfer of goods to the customer.
Businesses should follow the principles of variable consideration (including the restriction requirement to include variable consideration in the transaction**) to determine the amount of consideration it is expected to be entitled toThat is, the transaction** should not contain the amount of consideration for the goods that are expected to be returned.
At each balance sheet date, the enterprise should re-estimate the future sales returns, and if there is a change, it should be accounted for as a change in accounting estimates.
If the return and exchange of goods in daily sales are frequent, the enterprise should fully analyze the reasons for the frequent return and exchange of goods in daily sales, and strictly follow the above-mentioned principles related to the sale of goods with sales return clauses in combination with relevant facts and circumstances.
That is, the timing of the transfer of control of the goods should be reasonably determined, and when the control is actually transferred, the revenue shall be recognized according to the consideration after deducting the amount of the expected subsequent sales return, and the amount expected to be refunded due to the return of sales shall be recognized as a liability.
Shipping costs
*Originated from the Internet).
Principles of accounting
According to the new revenue standard, transportation costs that are not related to the performance of customer contracts are necessary to bring inventory to its current location and condition, and a resource that is expected to bring economic benefits to the enterprise is formedTransportation costs should be included in the cost of inventory, otherwise they should be included in the profit or loss for the current period.
For transportation activities related to the performance of the contract, which occur before the transfer of control of the goods, it does not constitute a single performance obligation, and the relevant expenses shall be disclosed as the cost of goods sold;
If it occurs after the transfer of control of the commodity, it constitutes a single performance obligation, and the enterprise shall disclose the relevant expenditure as the cost of the transportation service while recognizing the revenue from transportation services.
Specific processing caliber
For the transportation expenses incurred in the process of inventory production and sales, the enterprise shall properly distinguish the nature of the transportation expenses based on the occurrence and purpose of the transportation activities, and carry out accounting treatment in accordance with the provisions of the accounting standards for business enterprises.
For transportation costs unrelated to the performance of the customer contract, if the transportation costs are necessary expenses for the inventory to reach the current location and state, and the resources are expected to bring economic benefits to the enterprise, the transportation costs shall be included in the inventory cost, otherwise they shall be included in the sales expenses.
The transportation costs incurred for the performance of the customer's contract are the cost of contract performance under the revenue standard.
If the transportation activity occurs before the transfer of control of the goods, it usually does not constitute a single performance obligation, and the relevant expenses should be included in the contract performance costs as costs related to the sale of the goods, and finally included in the operating costs and properly disclosed.
If a transportation activity is re-controlled after the transfer, it usually constitutes a single performance obligation, and the enterprise should include the relevant expenses in the cost of transportation services and disclose them appropriately while recognizing the revenue from transportation services.
Businesses should:Combined with their own business activities and based on the principles of importance and cost-effectivenessEstablish and implement internal controls for the aggregation and allocation of costs and expenses related to transportation activities, fully and completely aggregate expenditures related to transportation activities, and achieve accurate allocation among products, sales contracts and performance obligations, so as to ensure that expenditures related to transportation costs can be properly recognized, measured and presented.
If it is not practicable for an enterprise to accurately calculate the transportation costs in accordance with the above provisions based on the principles of materiality and cost-effectiveness, the transportation costs may be directly included in the sales expenses when they are incurred and properly disclosed.
[Case].
The company mainly produces and operates transformers and complete sets of equipment, cable accessories, cable distribution boxes and medium and low voltage electrical product installation. Its business contract has the following clause "......The insurance, transportation, and handling costs before the delivery of the equipment shall be borne by Party B (Company A).
Party B is responsible for transporting the equipment to the location designated by Party A (customer) and installing it in place until the equipment can be powered on normally. 3. Final acceptance: ......According to the above contract terms, the installation and commissioning costs and transportation costs incurred by Company A are relatively large, usually accounting for about 19% of the total contract cost.
[Analysis].
In this example, the contract contains several commitments such as the sale of goods, transportation, installation and commissioning, whether these commitments are as a single performance obligation or as several individual performance obligations, the insurance, transportation, handling and installation and commissioning costs incurred before the delivery of the equipment are all costs incurred to fulfill these performance obligationsThat is: the cost of contract performance.
Insurance premiums, transportation costs, handling costs, and installation and commissioning costs, which are not within the scope of other accounting standards and are directly related to the contract, and increase the resources used by the enterprise to meet the performance obligations in the future, should be recognized as an asset in accordance with the new revenue standard, and amortized on the same basis as the commodity revenue recognition related to the asset, included in profit or loss for the current period, carried forward to operating costs, and cannot be directly included in sales expenses when incurred.
[Basis for analysis].
Article 26 of the Accounting Standards for Business Enterprises No. 14 - Revenue stipulates that "the costs incurred by an enterprise for the performance of a contract that do not fall within the scope of other accounting standards for business enterprises and meet the following conditions at the same time shall be recognized as an asset as the cost of contract performance
a) The cost is directly related to a current or anticipated contract and includes direct labor, direct materials, manufacturing expenses (or similar expenses), costs expressly borne by the customer, and other costs incurred solely as a result of the contract.
2) The cost increases the resources that the enterprise will use to fulfill its performance obligations in the future.
iii) The cost is expected to be recovered.
Payments made to ** persons
*Originated from the Internet).
According to the new revenue standard, if the cost incurred by an enterprise to perform a contract is directly related to the current or expected contract, increases the resources used by the enterprise to perform the contract in the future, and is expected to be recovered, it shall be recognized as the cost of contract performance, and the subsequent amortization shall be included in the operating cost.
If the incremental cost incurred by the enterprise in order to obtain the contract is expected to be recovered, it shall be recognized as the cost of contract acquisition, and the subsequent amortization shall be included in the sales expenses.
According to the CSRC's 2020 Annual Report on Accounting Supervision of Listed Companies, individual listed companies are engaged in the promotion of game products and sell game products to game users through channel distributors.
As the main responsible person, the listed company recognizes revenue according to the total consideration received or receivable, and includes the payment to the channel distributor as the contract performance cost and amortization into the operating cost.
The payment made by the listed company to the channel distributor does not increase the resources used by the enterprise to fulfill its performance obligations in the future, but is an incremental cost incurred to obtain the contract, which should be amortized as the cost of contract acquisition and included in the sales expense.