ACCA SBR ^UK Syllabus C. Reporting The Financial Performance Of A Range Of Entities - Crowdfunding - Notes ^{8 / 8}

Crowdfunding is a way to fund a new start-up or project by collecting money from various individuals or entities, often online.

There are 4 common methods of raising funds

and their accounting treatment is explained below:

1. Equity-based: Investors receive shares in the new company as a form of investment. 

   This falls under the scope of IAS 32 Financial Instruments: Presentation.

2. Debt-based: Contributors provide a loan to the business and expect repayment with interest. 

   This is a debt instrument under Financial Instruments.

3. Reward-based: Promises specific items or rewards to contributors before the project, product, or business launches. This is targeted at individuals who want to own the product rather than seeking financial gain. 

   This is revenue

4. Donation-based: Contributors make donations to a project or company and may receive rewards in return. Some forms of donation do not involve rewards, as donors simply want to support a specific cause. 

   If rewards are issued, this is Revenue

So you can see that IFRS 15 only applies if a crowdfunding campaign includes offering rewards

The question then is - is the obligation fulfilled over a period of time?

If so - revenue recognised gradually over time.
If not - revenue should be recognised when control passes

If the campaign organiser cannot reasonably estimate the outcome but expects to recover the costs associated with fulfilling the performance obligation, revenue should be recognised up to the amount of costs incurred.