1. NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: Revenue Recognition (Policies)
|9 Months Ended|
Feb. 28, 2021
The Company adopted ASC 606, Revenue from Contracts with Customers upon inception. Under ASC 606, revenue is recognized when control of the promised goods or services is transferred to the Companys customers, in an amount that reflects the consideration the Company expects to receive in exchange for services. The Company recognizes revenue upon meeting each performance obligation based on the allocated amount of the total consideration of the contract to each specific performance obligation.
To determine revenue recognition, the Company applies the following five steps:
1.Identify the contract(s) with a customer;
2.Identify the performance obligations in the contract;
3.Determine the transaction price;
4.Allocate the transaction price to the performance obligations in the contract; and
5.Recognize revenue as or when the performance obligation is satisfied.
Revenue is recognized as follows:
i.Freight income - export sales
Freight income from the provision of air, ocean, and land freight forwarding services are recognized over time based on a relative transit time basis thru the sail or departure from origin port. The Company is the principal in these transactions and recognizes revenue on a gross basis.
ii.Freight income - import sales
Freight income from the provision of air, ocean, and land freight forwarding services are recognized over time based on a relative transit time basis thru the delivery to the customers designated location. The Company is the principal in these transactions and recognizes revenue on a gross basis.
iii.Customs brokerage and other service income
Customs brokerage and other service income from the provision of other services are recognized at the point in time the performance obligation is met.
The Companys business practices require, for accurate and meaningful disclosure, that it recognizes revenue over time. The over time policy is the period from point of origin to arrival of the shipment at US Port of entry (or in the case when the customer requires delivery to a designated point, the arrival at that delivery point). This over time policy requires the Company to make significant judgements to recognize revenue over the estimated duration of time from port of origin to arrival at port of entry. The point in the process when the Company meets its obligation in the port of entry and the subsequent transfer of the goods to the customer is when the customer has the obligation to pay, has taken physical possession, has legal title, risk and awards (ownership) and has accepted the goods. The Company has elected to not disclose the aggregate amount of the transaction price allocated to performance obligations that are unsatisfied as of the end of the period as the Companys contracts with its customers have an expected duration of one year or less.
The Company uses independent contractors and third-party carriers in the performance of its transportation services. The Company evaluates who controls the transportation services to determine whether its performance obligation is to transfer services to the customer or to arrange for services to be provided by another party. As discussed under ASC 606-10-55, the Company determined it acts as the principal for its transportation services performance obligation since it is in control of establishing the prices for the specified services, managing all aspects of the shipments process and assuming the risk of loss for delivery and collection.
Revenue billed prior to realization is recorded as contract liabilities on the condensed consolidated balance sheets and contract costs incurred prior to revenue recognition are recorded as contract assets on the condensed consolidated balance sheets.
Contract assets represent amounts for which the Company has the right to consideration for the services provided while a shipment is still in-transit but for which it has not yet completed the performance obligation and has not yet invoiced the customer. Upon completion of the performance obligations, which can vary in duration based upon the method of transport and billing the customer, these amounts become classified within accounts receivable - trade.
Contract liabilities represent the amount of obligation to transfer goods or services to a customer for which consideration has been received. There were no contract liabilities outstanding as of February 28, 2021 and May 31, 2020.
Disaggregation of Revenue from Contracts with Customers
The following table disaggregates gross revenue by significant geographic area for the three and nine months ended February 28, 2021 based on origin of shipment (imports) or destination of shipment (exports):
Disclosure of accounting policy for revenue. Includes revenue from contract with customer and from other sources.
Reference 1: http://www.xbrl.org/2003/role/exampleRef