IFRS 15 accounting policies, warranties, financing, disaggregation of revenue, refund liabilities and right of return assets

Amer Sports Corporation – Annual report – 31 December 2018

Industry: sports goods

Revenue recognition
Amer Sports is in the business of selling technically advanced sports equipment, footwear and apparel. Revenue from contracts with customers is recognised at the point in time when control of the goods and services is transferred to the customer at an amount that reflects the consideration to which Amer Sports expects to be entitled in exchange for those goods and services. Amer Sports has generally concluded that it is the principal in its revenue arrangements because it typically controls the goods and services before transferring them to the customer. These revenue arrangements relate to freight services in all Amer Sports operating segments and to installation services in the Fitness segment. The revenue from the freight services is recognized at a point in time generally upon the delivery of the goods when the control has been transferred to the customer. Also the revenue from the installation services is recognized at a point in time generally after the customer has approved the installed equipment.

If the consideration in a contract includes a variable amount, Amer Sports estimates the amount of consideration to which it is entitled in exchange for transferring the goods and services to the customer. The variable consideration is estimated at contract inception and constrained until it is highly probable that a significant revenue reversal in the amount of recognized accumulated revenue will not occur when the associated uncertainty with the variable consideration is subsequently resolved. Contracts can provide the customers with a right of return, volume rebates, performance bonuses, payment term discounts and other discounts. The rights of return, volume rebates and discounts give rise to variable consideration.

Certain contracts provide a customer with a right to return the goods within a specified period. This relates mainly to the ecommerce business. Amer Sports uses the expected value method to estimate the goods that will be returned. For goods that are expected to be returned, Amer Sports recognizes a refund liability and a corresponding adjustment to the revenue. A right of return asset and a corresponding adjustment to cost of goods sold is recognized for the right to recover products from the customer.

Amer Sports provides volume rebates and performance bonuses to certain wholesale customers. The rebates and performance bonuses are granted when the customers’ purchases from Amer Sports exceed the threshold specified in the contract. Rebates and performance bonuses are offset against the trade receivables. Amer Sports applies mainly the expected value method to estimate the variable consideration for the expected future rebates and performance bonuses as the method best predicts the amount of variable consideration.

Amer Sports offers consumers certain loyalty campaigns where discount vouchers and credit points are granted to consumers. The loyalty points give usually rise to a separate performance obligation as they provide a material right to the consumer. A portion of the transaction price is allocated to the loyalty points based on the relative stand-alone selling prices and recognized as a contract liability until the points are redeemed. The likelihood that the consumer redeems the points is taken into account when the stand-alone selling price of the loyalty points is estimated. Revenue is recognized upon redemption of products by the customer.

Amer Sports offers certain customers extended payment times that exceed the normal payment times and can vary between 12 to 36 months. The revenue is recognized according to the value what the customer would have paid if the transaction was settled in cash being the expected value determined by using a discount rate to estimate the present value of the consideration. The revenue is recognized at the time when the control of the products is transferred to the customer. The loan receivables related to these sales are recognized in accordance with IFRS 9. The financing component is separate from the actual product revenue and recognized as interest income during the contract time when the customer pays in arrears. If the customer pays in advance, the financing component is recognized as interest expense. The discount rate shall be the rate that would be reflected in a separate financing transaction between Amer Sports and its customers at contract inception.

Amer Sports sells gift cards to consumers. The sold gift cards may not be fully redeemed and the unused amounts – the breakage – are recognized according to the expected value based on the historical breakage pattern.

Amer Sports provides typically warranties that promise the customer that the delivered product is as specified in the contract and covers general repairs for defects that existed at the time of sale, as required by law. These assurance-type warranties are accounted for under IAS 37 Provisions, Contingent Liabilities and Contingent Assets. In the Fitness business certain customers are provided with service-type warranties where the warranty provides a service to the customer beyond fixing defects that existed at the time of sale. The service-type warranty represents a distinct service and is a separate performance obligation. A portion of the transaction price is allocated to the warranty based on its estimated stand-alone selling price. Revenue allocated to the warranty is deferred and recognized over the period in which warranty service is provided.

Amer Sports pay sales commissions to its employees as well as to external sales representatives. Amer Sports applies the optional practical expedient for costs to obtain customer contracts that allow the costs to be immediately expensed as the amortization period would have been below 12 months. The sales commissions are reported as selling and marketing expenses. The sales commissions paid to employees are included under Employee benefits.

Net sales represent the invoiced value of goods, less value added taxes as well as discounts, incentives and rebates earned by customers and adding or subtracting foreign exchange differences. Net sales is one of the key measures in Amer Sports.
Revenue obtained from other companies is booked to license income when these companies manufacture or sell products bearing Amer Sports trademarks. In addition, license income includes royalty payments obtained from other companies when they utilize manufacturing technology patents owned by Amer Sports. License income based on fixed license agreements is recognized evenly throughout the financial year. License income determined by sales volumes is recognized during the financial year as the licensee generates sales revenue. The non-refundable minimum guarantees related to certain licensing agreements are for functional immaterial properties, where the guarantee revenue is recognized at the point in time the control of the license is transferred to the customer.

Other operating income comprises rental income, gains on the sale of non-current assets as well as other non-recurring income, such as patent settlements.



Trade receivables are non-interest yielding receivables. The allowance for the expected credit losses on trade receivables amounted to EUR 12.5 million.


Right of return asset represents Amer Sports’ right to recover the products expected to be returned by customers. The asset is measured at the former carrying amount of the inventory less any expected costs to recover the products, including any potential decreases in the value of the returned products.

Refund liability is the obligation to refund some or all of the consideration receivable from the customer and is measured at the amount Amer Sports expects it will have to return to the customer.