5.1 Definition

IFRS 15 defines revenue as “participants income arising in the course of an entity’s ordinary activities.” Income is defined as “increases in economic benefits during the accounting period in the form of inflows or enhancements of assets or decreases of liabilities that result in an increase in equity, other than those relating to contributions from equity participants” (CPA Canada, 2017, IFRS 15 Appendix A).

ASPE defines revenue as “the inflow of cash, receivables or other consideration arising in the course of the ordinary activities of an enterprise, normally from the sale of goods, the rendering of services, and the use by others of enterprise resources yielding interest, royalties and dividends” (CPA Canada, 2017, 3400.03a).

Both definitions refer to the ordinary activities of the entity, which suggests that gains made from incidental activities, such as the sale of surplus assets, cannot be defined as revenue. However, these gains are still considered income, as the Conceptual Framework includes revenue and gains as part of its definition of income. Revenue is realized when goods or services are converted to cash. The point when cash is realized is usually easy to identify. In a grocery store, when a customer pays for his or her purchase with cash, the revenue is realized at that moment. In a wholesale business, when goods are sold on credit, the revenue is not realized until the account receivable is collected and cash is deposited in the bank. However, in this case, the revenue would have been recognized at some earlier point when the account receivable was created. In accounting, the point at which revenue should be recognized is not always so simple to determine.