Revenues vs Gains

amdcai · 07-13-2006, 07:03 PM

The IASB Framework states that The definition of income encompasses
both revenue and gains.

Revenue arises in the course of the ordinary activities of an entity and is referred to by a variety of different names including sales, fees, interest, dividends, royalties and rent.

Gains represent other items that meet the definition of income and may, or may not, arise in the course of the ordinary activities of an entity. Gains represent increases in economic benefits and as such are no different in nature from revenue. Hence, they
are not regarded as constituting a separate element in this Framework.

Do you agree with me that distinguishing between them according to the IASB framework is vague ?

rememberence · 07-14-2006, 04:27 AM

<blockquote id="quote">quote<hr height="1" noshade id="quote">Originally posted by amdcai
 The IASB Framework states that The definition of income encompasses
both revenue and gains.

Revenue arises in the course of the ordinary activities of an entity and is referred to by a variety of different names including sales, fees, interest, dividends, royalties and rent.

Gains represent other items that meet the definition of income and may, or may not, arise in the course of the ordinary activities of an entity. Gains represent increases in economic benefits and as such are no different in nature from revenue. Hence, they
are not regarded as constituting a separate element in this Framework.

Do you agree with me that distinguishing between them according to the IASB framework is vague ?

<hr height="1" noshade id="quote"></blockquote id="quote">

You cant say that some writer has put vague definition. And you are talking about IASB!

Have your concept cleared here>>>

Income includes revenue and gains>>agree??

Revenue represents the core activities of your business like Manufacturing company's revenue is related to fertilizer product (just take an example)

Whereas gains are supplement to the business like gain on sale of fixed assets, it doesnt represent your core activity thats why IAS 16 specifically prohibits you from showing gain on sale of fixed assets as revenue.

So the distinction is very much clear.

Hope it clarifies..

amdcai · 07-14-2006, 12:34 PM

<blockquote id="quote">quote<hr height="1" noshade id="quote">Originally posted by Schuaeb
 I don't think so, distinguishing them seems pretty necessary at many places.
<hr height="1" noshade id="quote"></blockquote id="quote">

I didn't say that distinguishing between them according to the IASB framework is not necessary i said it is not clear.

amdcai · 07-14-2006, 12:39 PM

<blockquote id="quote">quote<hr height="1" noshade id="quote">Originally posted by rememberence
 <blockquote id="quote">quote<hr height="1" noshade id="quote">Originally posted by amdcai
 The IASB Framework states that The definition of income encompasses
both revenue and gains.

Revenue arises in the course of the ordinary activities of an entity and is referred to by a variety of different names including sales, fees, interest, dividends, royalties and rent.

Gains represent other items that meet the definition of income and may, or may not, arise in the course of the ordinary activities of an entity. Gains represent increases in economic benefits and as such are no different in nature from revenue. Hence, they
are not regarded as constituting a separate element in this Framework.

Do you agree with me that distinguishing between them according to the IASB framework is vague ?

<hr height="1" noshade id="quote"></blockquote id="quote">

You cant say that some writer has put vague definition. And you are talking about IASB!

Have your concept cleared here>>>

Income includes revenue and gains>>agree??

Revenue represents the core activities of your business like Manufacturing company's revenue is related to fertilizer product (just take an example)

Whereas gains are supplement to the business like gain on sale of fixed assets, it doesnt represent your core activity thats why IAS 16 specifically prohibits you from showing gain on sale of fixed assets as revenue.

So the distinction is very much clear.

Hope it clarifies..
<hr height="1" noshade id="quote"></blockquote id="quote">

I know the distinction between them very well, the distinction is not clear according to the IASB framework, could you explain to me the phrase "may, or may not" . If i don't know the distinction between them i could say that Gains may arise in the course of the ordinary activities of an entity.

rememberence · 07-14-2006, 06:55 PM

<blockquote id="quote">quote<hr height="1" noshade id="quote">Originally posted by amdcai

I know the distinction between them very well, the distinction is not clear according to the IASB framework, could you explain to me the phrase "may, or may not" . If i don't know the distinction between them i could say that Gains may arise in the course of the ordinary activities of an entity.
<hr height="1" noshade id="quote"></blockquote id="quote">

Make it more clear if u know.

The phrase "may not" is very clear from my previous example that is gain on sale of fixed assets.

For the word "may" take an example of bank or mutual fund. Banks invest their funds in securities of other companies inorder to have an effective use of funds available with bank and inorder to create subordinated loans in b/w banks. Although investment in securities is not their core activity, gain on sale of investments may be treated as their normal course of business because its ancillary to their main objective and their main objective is to utilize the funds. So, they may sell securities whenever the market is favourable. Thats why gain on sale of investments is shown on the face of income statement according to BSD 36 issued by State Bank of Pakistan. The status of it is still 'gain' and not 'revenue'.

amdcai · 07-15-2006, 12:41 AM

Since sale of investments is an ordinary activity of mutual funds so it's return is considered as revenue not gain.

rememberence · 07-15-2006, 12:47 AM

My focus was bank, I think. Isnt it?

rememberence · 07-15-2006, 12:57 AM

Moreover the BSD 36 also refers to a bank and not a mutual fund.

I intentionally used the name of mutual funds, have a look at some mutual fund's accounts first then we will discuss why did I use it.