CORE 1

Question 1

Revenue Recognition - Exam Reference

Answer 1

IFRS 15 - Revenue from Contracts with Customers

ASPE 3400 – Revenue

Question 2

Revenue recognition — IFRS 15 Revenue from Contracts with Customers - 5 criterias

Answer 2

1. Identify the contract
2. identify the performance obligation(s)
3. Determine the transaction price
4. Allocate the transaction price to each performance obligation
5. Recognize revenue when each obligation is satisfied

Question 3

Revenue Recognition - IFRS 15
1. Identify the contract - 5 attributes

Answer 3

In order to be considered a contract, an agreement must have the following attributes:
- It is approved by all parties.
- Rights regarding goods and services to be transferred can be identified.
- Payment terms can be identified.
- The contract has commercial substance.
- It is probable that the entity will collect the consideration to which it is entitled, considering only the customer’s ability and intention to pay.

Contracts, and the approval of contracts, may be written, oral, or implied by an entity’s customary business practices.

Question 4

Revenue Recognition - IFRS 15
2. Identify the performance obligation(s) (IFRS 15.22) - two types

Answer 4

A performance obligation is a promise to a customer to transfer one of the following:
- a good or service (or a bundle of goods or services) that is distinct
- a series of distinct goods or services that are substantially the same and that have the same pattern of transfer to the customer

Question 5

Revenue Recognition - IFRS 15
3. Determine the transaction price (IFRS 15.47)
- 5 considerations

Answer 5

You must consider the following:
- variable consideration
- constraining estimates of variable consideration
- significant financing components
- non-cash consideration
- consideration payable to a customer

Question 6

Revenue Recognition - IFRS 15
4. Allocate the transaction price to each performance obligation (IFRS 15.73)
- 4 Ways

Answer 6

Relative stand-alone selling price

Or, if that is not available, can be estimated using:
- adjusted market assessment approach
- expected cost plus a margin approach
- residual approach

Question 7

Revenue Recognition - IFRS 15
5. Recognize revenue when each obligation is satisfied (IFRS 15.31)

Answer 7

An entity recognizes revenue when it has satisfied its performance obligation to the customer. This may occur over time or at a single point in time.

Question 8

Revenue Recognition - ASPE 3400
3 Criteria

Answer 8

Under ASPE, revenue is recognized when the following the criteria are met:
- Performance is achieved (3400.05(a))
- Revenue can be measured reliably (3400.05(b))
- Collection is reasonably assured (3400.04)

Question 9

Revenue recognition — ASPE 3400
- When is performance achieved in a sale of goods?

Answer 9

In a sale of goods, ASPE defines performance as being achieved when the seller has transferred the significant risks and rewards of ownership to the buyer. This occurs when:
- The seller has no continuing managerial involvement in the goods; or
- Effective control of the goods.

Revenue recognition under ASPE commonly takes place at the point of delivery to the customer.

Question 10

Revenue recognition — ASPE 3400
- When is performance achieved in a sale of services?

Answer 10

In a sale of services, revenue is recognized as the service or contract activity is performed. As a result, the point at which risks and rewards transfer is determined using either:
- The percentage of completion method; or
- The completed contract method.