Ch6 - Revenue recognition issues

Question 1

List the 5 steps of revenue recognition.

Answer 1

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

Question 2

IFRS 15 is applicable to those contracts, at which five attributes are met. List the 5 attributes that need to be fulfilled to apply IFRS 15 - contracts with customers.

Answer 2

1. Parties to the contract have approved the contract and are committed to perform.
2. Each party’s rights to the goods(services transferred are identified.
3. The payment terms are identified.
4. The contract has a commercial substance.
5. It is probable that an entity will collect the consideration (evaluation of the customer’s ability and intention to pay).

Question 3

Which IFRS is applicable for recognition of interest and dividends?

Answer 3

IFRS 9 - Financial Instruments

Question 4

When does the need to recognize deferred taxes occur?

Answer 4

Deferred taxes are recognized in case when we have TEMPORARY differences between treatment of transactions / events in financial accounting and for tax accounting purpose.

Question 5

What are the reasons to change an accounting policy?

Answer 5

We change accounting policies:

1. if it is required by an IFRS or
2. if the change results in the financial statements providing reliable and more relevant information about the effects of transactions, other events or conditions on the entity’s financial position, financial performance or cash flow.

Question 6

How do we show changes of accounting policies in the financial statements?
(prospectively or retrospectively)

Answer 6

Retrospectively.

Question 7

How do we show changes of accounting estimates in the financial statements?
(prospectively or retrospectively)

Answer 7

Prospectively.