On 13 November 2003, the ASB issued requirements on revenue recognition, in the form of an Application Note to FRS 5 'Reporting the Substance of Transactions'. The Application Note is concerned with the reporting of turnover - 'the top line' of the profit and loss account. Entities should report turnover only when they have performed in accordance with the contractual arrangements with their customers. Guidance is also given on the measurement of turnover where there are deferred payment terms or where there is a significant risk about the customer's ability to pay.

The Application Note builds on ASB's recent work, including the Discussion Paper issued in 2001 and its further thinking in the light of the comments received in response to that Paper. The Application Note also addresses a number of specific types of transaction:

• Long-term contractual performance;
• Separation and linking of contractual arrangements;
• Bill and hold arrangements;
• Sales with rights of return; and

Presentation of turnover as principal or as agent.
In September 2002 the International Accounting Standards Board and the US Financial Accounting Standards Board agreed to combine their separate researches into a joint project to develop a new accounting standard which will replace IAS 18, Revenue. The ASB fully supports these efforts. The Application Note is intended as an interim step to emphasise the principles that underlie current good UK practice, pending the development of a new standard to replace IAS 18.

To find out how to obtain a copy of the 'Amendment to FRS 5 'Reporting the Substance of Transactions' Revenue Recognition', or the ASB Discussion Paper 'Revenue Recognition' see Publications.