Trading
Definition
Trading activities
are defined as the business of buying and selling commodities, products, or
services. It includes delivery but excludes any and all manufacturing
activities.
Trading activities have to be included in the product sub-segment Trading only if relates to clinker and cement or mineral components.
The product sub-segment Trading can only be used by companies involved exclusively in trading activities of clinker and cement or mineral components with no manufacturing activities of the same products.
Agent versus Principal
For the recognition
of net sales and cost of sales, a decision has to be made if the company acts
as an agent or principal in its trading activities.
Determining whether
a trading company is acting as a principal or as an agent requires judgement
and consideration of all relevant facts and circumstances, and the key
issue that remains, is to establish
which party is exposed to the significant risks and rewards associated with the
sale of goods (i.e. is acting as
principal).
Four indicators are
used to determine the agent or principal status:
1. The entity has the primary responsibility for providing the goods or services to the customer or for fulfilling the order, for example by being responsible for the acceptability of the products or services ordered or purchased by the customer.
2. The entity has the inventory risk before or after the customer order, during shipping or on return.
3. The entity has latitude in establishing prices, either directly or indirectly, for example by providing additional goods or services.
4. The entity bears the customer’s credit risk for the amount receivable from the customer.
The four indicators
above cannot be viewed individually presumptive or determinative and as such
carry a similar weight when considering the accounting assessment.
An entity is acting
as an agent when it does not have exposure to the significant risks and rewards
associated with the sale of goods or the rendering of services.
Examples & Comments
Companies
involved in the manufacture of cementitious materials have to disclose trading
activities either within the product sub-segment Clinker and Cement or Mineral
Components and other cementitious materials
Companies NOT involved in the manufacture of cementitious materials have to disclose trading activities of clinker, cement, mineral components within the product sub-segment Trading.
Companies involved in trading activities of all other core products (aggregates, ready-mix, asphalt, mortar, pre-cast) have to disclose these trading activities within the product the corresponding sub-segment
Where in the trading activities the Company acts as “an agent” these revenues must be disclosed as net, the revenues and cost of sales in one line Net Sales Other.
One feature indicating that an entity is acting as an agent is that the amount the entity earns is predetermined, being either a fixed fee per transaction or a stated percentage of the amount billed to the customer.
cementitious materials
All other buying and
reselling activities, which are not related to the core products or activities
(unless it is a cost reduction for the corresponding material) will be recorded as By-products and other revenues.
Example: if an aggregates segment of a GRU uses the
aggregates network to distribute and sell cement manufactured by the CLC
segment of the same GRU. The net revenue should be recorded as By-product
revenue in the aggregates segment, in the plant (quarry / pit / shipping
station) handling the cement.
Where in the trading activities the Company acts as “a principle” (see above definition of ‘agent’) these revenues must be disclosed separately, Net Sales - Core and cost of sales in one line Cost of Goods Purchased.
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