BusinessCompany NewsNew revenue rule hits retailer

New revenue rule hits retailer

Merchant Retail Group is the first company to be hit by new revenue recognition rules, which have forced the company to reduce its interim turnover by a hefty 15%.

Link: Retail to benefit from revenue recognition rules

Using the new standard, interim turnover was £51.4m compared with £60.7m, calculated in accordance with previous ‘industry practice’.

In a note in its accounts, Merchant Retail said it had historically shown sales from concessions on a gross basis, while the new standard requires such sales to be shown on a net basis.

The Accounting Standards Board rules are meant to prevent exaggeration of revenues and deliver more transparent and comparable figures.

One implication is that department stores with concession outlets within them will no longer be able to get away with including the revenues of concessions in their own results.

Merchant Retail Group, which owns the Perfume Shop chain, and the Joplings and De Gruchy department stores, becomes the first company to announce a dramatic correction.

Mary Keegan, ASB chairman, said: ‘Recent reports of questionable practice have highlighted the need for us to set out best practice.’

The standard dealing with the top line of the profit and loss account means entities should report turnover only when they have performed in accordance with contractual arrangements customers. Guidance is also given on the measurement of turnover where payment terms are deferred.

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