Revenue Recognition Accounting Policy
Revenue is recognised in the income statement when goods or services are supplied or made available to external customers against orders received, title and risk of loss is passed to the customer, reliable estimates can be made of relevant deductions and all relevant obligations have been fulfilled, such that the earnings process is regarded as being complete.
Turnover represents net invoice value after the deduction of discounts and allowances given and accruals for estimated future rebates and returns. The methodology and assumptions used to estimate rebates and returns are monitored and adjusted regularly in the light of contractual and legal obligations, historical trends, past experience and projected market conditions. Market conditions are evaluated using wholesaler and other third-party analyses, market research data and internally generated information. Value added tax and other sales taxes are excluded from revenue.
Where GSK co-promotes a product and the third party records the sale, GSK records its share of revenue as co-promotion income within turnover. The nature of co-promotion activities is such that GSK records no costs of sales. Pharmaceutical turnover includes co-promotion revenue of £221 million (2010 – £294 million; 2009 – £439 million).
Royalty income is recognised in other operating income on an accruals basis in accordance with the terms of the relevant licensing agreements.
Source: GlaxoSmithKline PLC, Annual Report
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