Under IFRS, income is defined as increases in economic benefits in the form of inflows or enhancements of assets or decreases in liabilities, provided they result in increases in equity other than those relating to owner contributions. Contributions from owners are excluded because they are not the result of the company’s operating performance.

In a consignment arrangement, the seller (consignor) retains the risks and rewards of ownership until the goods are sold to an end customer. Therefore, the revenue is recognized when the retailer sells the product, not when it is delivered to the retailer or when payment is received.

Under the accrual basis, revenue is recognized when earned, not when cash is received.
Net revenue = Gross revenue − Sales returns and allowances

Net Revenue = 1,200,000 − 150,000 = 1,050,000

Cash collected and cost of goods sold do not affect net revenue directly.

Under the percentage-of-completion method, revenue is recognized in proportion to the amount of service provided. Since 40% of the service is expected to be delivered in Year 1:

Revenue Recognized = 40% × 600 = 180

Recognizing $300 or $600 would incorrectly assume that 50% or 100% of services were delivered in the first year, which contradicts historical service data.

Since BrightBridge acts as an agent and does not own the inventory, it must report only the net commission it earns as revenue—not the total sales proceeds. The correct revenue to report is:

Revenue = Commission retained = $900,000

Deferred income (also known as unearned revenue) arises when a company receives payment before delivering goods or services. In such cases, the revenue is not yet earned and is recorded as a liability on the balance sheet. Revenue is recognized gradually as the service is provided or the goods are delivered. Prepaid expenses and accrued liabilities relate to costs, not income.

The converged standards (IFRS 15 / ASC 606) require that incremental costs of obtaining a contract (e.g., sales commissions) be capitalized and amortized over the life of the contract rather than expensed immediately. This change results in lower expenses up front, making initial profitability appear higher compared to the company’s previous treatment.

Under the matching principle, expenses are recognized in the period in which the related economic benefits are consumed or when a previously recognized benefit is lost. This ensures that costs are matched to the revenues they help generate. Expenses are not recognized simply when paid, nor are they deferred indefinitely based on expectations of future benefits.

Under IFRS, unusual or infrequent events such as a natural disaster loss are still included in continuing operations on the income statement. Only the results of business segments that have been disposed of or are held for sale are classified under discontinued operations. Other comprehensive income includes certain items like unrealized gains/losses, not operating losses.

Under U.S. GAAP, for periods beginning after 15 December 2015, items that are unusual or infrequent are reported within continuing operations, not as separate line items below. However, if they are material, they must be presented separately or disclosed in the notes to help users understand their impact on performance.