Hi,
A Company has an agreement with Company B as:
Company B will purchase all shareholding of Company A in consideration of $ 100 :
1. Immediately payment of $50; and
2. remaining amount ($50) will be settled as rendering of service by company A to B in exchange of transfer of share of B in favour of company C.
Is this revenue transaction under IFRS 15 in respect of company A? No any consideration will be pay to A in exchange of service nor any transfer of share.
Revenue recognition under IFRS 15
Re: Revenue recognition under IFRS 15
Why would A do this? Seems like the owner of A is extracting value in 'services' for its own purposes.
Re: Revenue recognition under IFRS 15
An contract has been signed between two parties. The terms of agreement are drafted in view to avoid taxation.
Re: Revenue recognition under IFRS 15
So A signs a contract where it performs services and gets nothing in return. So it's not revenue as the scope of IFRS 15 requires commercial substance.
Re: Revenue recognition under IFRS 15
For this transaction to be in scope of IFRS 15, there also must be a customer which is defined as a party that enters into a contract with an entity to obtain goods or services resulting from the entity’s ordinary activities, in return for a consideration (IFRS 15.6).
Re: Revenue recognition under IFRS 15
If wonder if the cost of providing those specific services is actually a distribution, as the owner is extracting that value to settle their liability (to acquire B). I assume A and C have common ownership.
Re: Revenue recognition under IFRS 15
I find the scenario confusing to be honest. B acquires A, but we don't know from whom. And as part of consideration, A (the acquiree!) provides services to B (the acquirer)...
Re: Revenue recognition under IFRS 15
Oh I thought C acquires B but A 'pays' for it in services.