Professional Documents
Culture Documents
Chapters 4 & 5
NATURE OF RECEIVABLES
These are financial assets that represent a contractual right to receive cash or another financial
asset from another entity.
Receivables represent amounts collectible from customers and others, most frequently arising
from sales of merchandise, claims for money lent, or the performance of services. (SFAS No. 3)
CLASSIFICATION
“an entity shall classify an asset as current when the entity expects to realize the asset or intends to sell
or consume it in the entity’s normal operating cycle, or when the entity expects to realize the asset
within twelve months after the reporting period.”
Trade receivables = classified as current assets if they are expected to be realized in cash within the
normal operating cycle or one year, whichever is longer.
Nontrade receivables = classified as current assets if they are expected to be realized in cash within one
year, the length of the operating cycle notwithstanding.
PRESENTATION
Trade and nontrade receivables which are currently collectible shall be presented on the face of
the balance sheet as one line item called trade and other receivables.
The details of the total trade and other receivables shall be disclosed in the notes to financial
statements.
EXAMPLES OF NONTRADE RECEIVABLES
= if collectible within one year, classified as current assets; otherwise, noncurrent assets.
Subscription receivable= current assets if collectible within one year; otherwise, deduction from
subscribed share capital.
PFRS 9:
Provides that a financial asset shall be recognized initially at fair value plus transaction costs that
are directly attributable to the acquisition.
PFRS 9:
Net realizable value = it is the amount of cash expected to be collected or the estimated
recoverable amount.
Amount of freight charges collected by the shipper from the buyer even though the shipment
was under FOB destination terms.