Bellarine Plc is publisher of Mode magazine and its customers usually sign a three-year subscription with an advance payment of €500.Mode magazine has 12 issues in a year.What is the appropriate accounting treatment for this sale on the date of signing that is in accordance with IASB (2011)Revenue?

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According to IASB (2011) Revenue, revenue should be recognised when it is probable that future economic benefits will flow to the entity and these benefits can be reliably measured. In the case of Bellarine Plc, as the customer has made an advance payment for a three-year subscription, there is an obligation for the company to provide 36 issues over the subscription period. As Bellarine has not yet fulfilled its obligations, the payment should be recognised as unearned (or deferred) revenue until the magazines are delivered. Therefore, the appropriate accounting treatment for this sale is to recognise the sale as unearned revenue.

Bellarine Plc Is Publisher of Mode Magazine and Its Customers