Contract Assets and Liabilities - Expert

Question 1

Contract Assets - Distinction from Receivables

Answer 1

Receivables: Present right of Siemens to consideration from customer which is unconditional - only the passage of time is required before consideration is due
Contract assets: Right of Siemens that is conditional (PAC or satisfaction of Performance Obligation)

Question 2

Contract Liability - Def

Answer 2

Obligation of Siemens to satisfy a performance obligation in the future.
Non PoC: Amount already received from customer
PoC: When Payment exceeds Siemens performance

Question 3

Refundable avance payments

Answer 3

Advance payments that are possibly refundable are NOT treated differently from non-refundable.
At the point in time when final transfer of control to customer - recognition of refund liability to be assessed

Question 4

Non PoC Cases - Receivable / Contract Asset

Answer 4

Receivable: Payment is independent
Contract asset: Payment is dependent

Question 5

Recognition of contract assets and receivables (PAC)

Answer 5

At the point in time of acceptance by the customer a receivable is recognized. If no PAC is required a receivable is recognized at the point in time when the customer can be invoiced

Question 6

Subsequent measurement Contract Asset Liability

Answer 6

Valudation allowance has to be recognized to reflect credit rating / customer’s ability to pay. Allowance determined at contract level

Question 7

Cases where it is not possible to recognize contract asset

Answer 7

1) One performance Obligation using straight line. -> An unconditional right to payment arises proportionally therefore no contract asset recognized
2) One PO at point in time - An unconditional right to payment exists when transfer of control.

Question 8

Disclosure Requirements of Contract Assets and Liabilities

Answer 8

Opening and closing balances
Revenue recognized in current reporting period that was included in the contract liability balance at the beginning of period
Long term position >12 months