Turnover was previously measured at the fair value of the consideration received or receivable, net of discounts and value added taxes. Turnover includes revenue earned from the sale of goods and from the rendering of services. Turnover is reduced for estimated customer returns, rebates and other similar allowances.
Rendering of services
Turnover from the rendering of services is recognised by reference to the stage of completion of the contract. The stage of completion of a contract is measured by comparing the costs incurred for work performed to date to the total estimated contract costs. Turnover is only recognised to the extent of recoverable expenses when the outcome of a contract cannot be estimated reliably.
However early adoption of the September 2024 FRS review means that from 1st November 2024, the company recognises revenue at the fair value of the consideration received or receivable. Revenue is recognised when the performance obligation has been fulfilled in accordance with FRS 102, Section 23.
Revenue in respect of servicing contracts is recognised as the company performs its obligations and when the outcome of the transaction can be estimated reliably.
The company is able to reliably estimate the outcome of a service contract when all of the following conditions are satisfied:
● the amount of revenue can be measured reliably;
● it is probable (ie, more likely than not) that the economic benefits associated with the transaction will flow to the entity;
● the stage of completion of the transaction at the end of the reporting period can be measured reliably; and
● the costs incurred for the transaction and the costs to complete the transaction can be measured reliably.
Where the company renders invoices in advance of work performed, the sale is deferred in the balance sheet as deferred income and is presented within creditors falling due within one year until the revenue recognition criteria in FRS 102, Section 23 Revenue is met.