Where the agreed timing of payments gives either party a significant financing benefit in respect of the transfer, explicitly or implicitly, the promised consideration is adjusted for the time value of money so that revenue reflects the cash selling price at transfer. The assessment weighs the gap between promised consideration and cash selling price together with the expected time between transfer and payment and prevailing market rates. No significant financing component exists where the customer paid in advance and controls the timing of transfer, where a substantial part of the consideration is variable on events outside either party's control such as a sales-based royalty, or where the difference arises for another reason, such as protection against non-performance, and is proportionate to it. The entity may ignore financing where it expects at inception that transfer and payment fall within one year of each other. The discount rate is the one a separate financing between the parties would carry at inception, reflecting the credit characteristics of the party being financed and any collateral, and is not updated afterwards. Interest revenue or expense is presented separately from revenue from customer contracts and only to the extent a contract asset, receivable or contract liability is recognised.
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