Revenue Recognition Buyback Agreement

The process for determining the nature of a pension contract has changed significantly from ASC 605 to ASC 606. Under CSA 605, instructions focused on whether the risks and revenues of the property had been transferred to the client. ASC 606 focuses on both the type of buyback rights and the difference between the purchase price and the initial selling price. This change in focus makes instructions easier, which can simplify some ambiguous situations under ASC 605. The rule is that revenue from the sale of inventory is recorded at the point of sale, but there are several exceptions. Sometimes revenue collection is not guaranteed at the Point of Sale. In cases of high uncertainty, one of the two methods is generally used: the method of selling at a rate and the method of cost recovery. Indeed, these methods are contrary to the principle of matching and should only be used in cases of significant uncertainty in the collections. Companies should use completion percentage methods when estimates of progress towards completion, revenue and costs are reasonable and reliable; conditions. 7 REVENUE ACCOUNTing POLICY Industry-recognized net sales relate to the proceeds of vehicle and service sales. Vehicle and service sales are accounted for when control has been transferred from Volvo Group to the customer.

Control refers to the ability of customers to use vehicles or services in its operation and to obtain associated cash flow related to usage. Vehicles and services are sold separately or as a combined offer. In combined offers where the vehicle and services are dissociable and the customer can benefit independently from vehicles and services, the transaction price is distributed between vehicles and services, based on the retail price, according to price lists. The principle of revenue recognition: revenues are recorded when they are realized or achievable, and earned. This was a response to some of the respondents` comments that the purchase price of a put option is not always close to or close to the original selling price and that, in some sectors, the put option is only exercised after the initial sale and in some cases the repurchase price is lower than the original selling price, since the asset is not returned to the state in which it was sold. Therefore, the client may be considered authorized to use the asset until the put option is exerciseable and, at this point, the customer may choose to retain the asset or resell it to the entity. These cases seem more economically comparable to a lease agreement than to a right of return. Staff expressed concern that there may be a trade-off between the leasing standard and the performance standard at this time. Several board members expressed concern that the recommended wording of employees did not explicitly cover a time factor, a wear and tear factor or circumstances in which the repurchase price was significantly lower than the estimated market value, indicating that there was a sale and not a leasing transaction. The Boards of Directors provisionally approved the principle of the recommendation, but asked the staff to review the text to clarify matters by including references to a time factor and to strongly encourage the client to return the assets.

Under these conditions, the performance standard would require the company to apply the leasing model in the leasing standard. Some board members indicated that this could lead to situations in which the performance standard would refer to the company at the leasing level, although the company`s products/services (for example). B intangible assets) become an area of application.