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Revenue should be measured at the fair value of the consideration received or receivable.
- If the sale is a cash sale, then the revenue is the immediate proceeds of sale. Allowance may be made for expected returns.
- If the sale is a credit sale, i.e. a sale for a claim to cash, then anticipated cash is revenue.
For example, if the anticipated collectable value on sales $1,000 is $950, current practice, would show $1,000 as revenue and $50 as an expense in the income statement.
If the inflow of cash is deferred, the fair value of the consideration may be less than the nominal amount receivable. The difference between the fair value and the nominal amount of the consideration si recognised as interest revenue in the period or periods over which the credit is granted.
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