Chapter 7 - Revenue

Question 1

What standard covers revenue?

Answer 1

IFRS 15

Question 2

What are the 5 steps in revenue recognition?

Answer 2

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

Question 3

IFRS 15 applies to all contracts to customers, except what circumstances?

Answer 3

• lease contracts under IFRS 16
• insurance contracts under IFRS 17
• financial instruments / contractual rights in the scope of IFRS 9, IFRS 10, IFRS 11, IAS 27 and IAS 28
• non monetary exchanges between two entities in the same line of business to facilitate sales

Question 4

How is income defined in the conceptual framework?

Answer 4

Increases in assets, or decreases in liabilities, that result in increases in equity, other than those relating to contributions from holders

Question 5

True or false:

IFRS 15 applies to accounting for interest and dividends

Answer 5

False. These were previously included under IAS 18, however are not now.

Question 6

When is an asset considered transferred under IFRS 15?

Answer 6

When customers gains control over that asset

Question 7

Under IFRS 15, when is a performance obligation satisfied?

Answer 7

When entity transfers control of the good or service.

Critical to determine whether control is transferred at a single point or over time

Question 8

Under IFRS 15, when is revenue recognised?

Answer 8

When the entity satisfies a performance obligation by transferring a promised good or service to a customer

Question 9

Under IFRS 15.35, what criteria determines if a transfer of a good or service is over time, or at one time?

Answer 9

If over time, one of the following:

• Customer simultaneously receives and consumes benefits as the entity performs then
• The entity’s performance creates or enhances an asset that the customer controls as the asset is created or enhanced
• The entity’s performance does not create an asset with an alternative use to the entity and the entity has an enforceable right to payment for performance completed to date

Question 10

Under IFRS 15, how can progress towards satisfaction of a performance obligation be measured?

Answer 10

Measured using

• output methods (e.g. surveys, milestones achieved, time elapsed, units delivered etc)

OR

• input methods (e.g. resources consumed, labour hours, costs incurred).