CERTYNEX IFRS ACADEMY

When reviewing the 20X1 financial statements of Solvane, which sells cosmetics with a 60-day right of return, you note that December sales of 80,000 were recognised in full as revenue and that a provision of 4,000 was recognised as an expense for the expected returns. Returned products are put back on sale. What correction do you propose?

None: the provision recognised as an expense leads to the same profit as a reduction of revenue.

Reduce revenue to 76,000, reclassify the 4,000 as a refund liability and recognise an asset for the right to recover the products.

Reduce revenue to 76,000 and reclassify the 4,000 as a refund liability, with no other adjustment.

Reverse all December sales until the 60-day return period expires and present all amounts received as a contract liability.