in General IFRS Discussion by Level 1 Member (1.1k points)
Dear Friends,
Good day!!!

I am expecting the answer in line with IFRS.

We are a trading company. We import goods from outside the country and export to another countries. The basic issue is for the carriage cost incurred at the time of sales.

1. Assume that there is  a customer 'X' to whom we have to export the goods.
2. The invoice total is USD 100 and  break up are like this :( Goods Value = 80 + Carriage/Transport =15 + Insurance=5)
3. Now, the Company has not its own transportation facilities and even insurance facilities need to be outsourced.
4. In doing so, the company pays USD 8 as transportation fees USD 2 as insurance fees.
5. The cost of the product is USD 60 (assumed)

Now the query is :
a) Shall we take USD 15 and USD 5 as direct revenue
b) Shall we take USD 8 and USD 2 as direct cost
c) Can we take the *** amount as other Income (here, 15+5-8-2=10)

If we take USD 15 and USD 5 as direct revenue and ignore USD 8 and USD 2 while computing the Gross Profit, the Gross Profit will be inflated, which I believe is not correct.

Thanks in advance. I would be really happy to get the references link from the IFRS Standards.
In nut sell, the query is : whether the carriage cost charged to the customer and carriage cost separately paid to the shipping agent form part of direct revenue and direct cost or not for the purpose of computing gross profits under IFRS.

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1 Answer

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My view is based on segregating the core revenue and matching it with core costs attracted to sale.

Accordingly, since your export business involves shipment carriage charges that are recovered from buyer with a mark up of sorts, your best accounting is for you to *** off the cost of carriage with the recovery from your sale and show the mark up as other income in revenues line. An alternative approach will be to show the *** carriage income after operating profit.

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