5.6 Revenue from contracts with customers

Question 1

What is the role of IFRS 15?

Answer 1

To tighten specifics of ow revenue is recognized (following issues of fraud such as Enron).

Question 2

How does IFRS15 measure the transfer of goods? Is it by transfer or control, or by transfer of risk?

Answer 2

Transfer of control, i.e. the ability to use the benefits of the asset.

Question 3

IFRS 15 uses a 5-step process for revenue recognition. What are the steps?

Answer 3

1 Identify the contracts with a customer
2 Identify the performance obligations in the contract
3 Determine the transaction price
4 Allocate the transaction price to the performance obligation of the contract.
5 Recognise the revenue when (or as) the entity satisfies a performance obligation.

Question 4

If an entity sells a bundle of goods (e.g. mobile phones included in a monthly sim contract), how should revenue be calculated - separately or combined?

Answer 4

Separately if the individual items have value separately.