Elliott - Chapter 8 - Revenue Recognition

Question 1

IAS 18 - Revenue is current in operation for accounting for:

Answer 1

Revenue for goods
Revenue from services
Interest, royalties and dividends

Question 2

Recognition criteria for IAS 18 - Revenue (5)

Answer 2

1. The entity has transferred to the buyer the significant risks and rewards of ownerships of goods.
2. The entity retains neither continuing managerial involvement ti the degree usually associated with ownership nor effectively control over goods sold
3. The amount of revenue could me measured reliably.
4. It is probable economic benefits associated with the transaction will flow to the entity.
5. The costs incurred or to be incurred in respect of the transaction can be measured reliably

Question 3

Conditions for rendering of services

Answer 3

When the outcome of a transaction involving the rendering of services can be estimated reliable, revenue associated with the transaction shall be recognised by reference to the stage of completion of the transaction at the end of the reporting period.

Question 4

Factors influencing the certainty of a payment:4

Answer 4

1. Consideration being highly susceptible to factors outside the entity’s influence such as volatility in a market, the judgement or actions of third parties etc
2. The uncertainty about the amount of consideration not expected to be resolved for a long period of time
3. The entity’s experience
4. The entity has a practice of either offering a broad range of price concessions or changing payment terms and conditions of similar contracts in similar circumstances