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IAS & IFRS Standards Overview > IFRS 15 > Flashcards

IFRS 15 Flashcards

1
Q

1st step?

A

Identify the contract

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2
Q

2nd step?

A

Identify each performance obligation

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3
Q

3rd step?

A

Determine transaction price

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4
Q

4th step?

A

Allocate transaction price to performance obligations

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5
Q

5th step?

A

Recognise revenue as each performance obligation satisfied

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6
Q

identify contract?

A

Contract approved by all parties
Rights and payment terms identified
Contract has commercial substance
Probable revenue collected

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7
Q

Identify separate performance obligations?

A

What can be separately sold

If sold alone, account for separately

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8
Q

Example of two performance obligations?

A

Buy a TV
And a guarantee for 3 years

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9
Q

What is the transaction price?

A

What am I most likely to receive?

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10
Q

What should be considered in transaction price?

A

Significant financing components
Variable consideration
Refunds and rebates

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11
Q

How is allocation of price determined?

A

On each performance obligation based on standalone customer selling price

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12
Q

Richer Co sells home entertainment systems including two-year repair and maintenance package for $10000. Price of home entertainment system without repair and maintenance contract is $9000 and price to renew a two-year maintenance package is $2000?

What are standalone selling prices?

A

$9000 and $2000 are standalone

($9000/$11000) * $10000 = $8,182
($2000/$11000) * $10000 = $1,818

These then add up to 10000

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13
Q

If performance obligation is transferred over time?

A

Completion of performance obligation is measured using output or input method

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14
Q

What is the output method?

A

Revenue recognised based upon value to customer (output company providing)

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15
Q

Output method calculation?

A

Work certified / Total contract revenue * 100

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16
Q

What is the input method?

A

Revenue recognised based upon amounts the entity has used (costs incurred over time)

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17
Q

Input method calculation?

A

(Costs to date / total estimated costs) * 100

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18
Q

What is a contract asset?

A

Recognsied when revenue has been earned but not yet invoiced

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19
Q

What represents a receivable?

A

An invoice has been issued

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20
Q

What is a contract liability?

A

Customer has paid prior to entity transferring control of good/service to the customer

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21
Q

When may revenue recognition occur?

A

At a single point in time
Over a period of time

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22
Q

How to calculate work certified as complete?

A

Through input or output method

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23
Q

Cod Co sold goods to Eel Co on 1 January 20X2 for $200000, payable on 31 December 20X3. Eel Co cannot return the goods (Significant financing component)

The relevant discount rate is 6%

Amount of revenue and finance income recognised in SPL for year ended 31 Decemebr 20X2?

A

Revenue: 200000 * (1/1.06^2) = 178000

Finance cost: 178000 * 6% = 10680

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24
Q

What stage is the input and output method potentially used?

A

At step 5 (final stage)

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25
Q

Livertech is a computer business that sells computer hardware. As well as selling computers, it also supplies and installs the software to its customers and provides a technical support package over two years. Business commonly sells the supply and installation, and technical support in a combined goods and services contract.

Combined goods and services contract sells for $1600, but is sold separately the supply and installation, and if sold separately supply and installation is sold for $1500 and technical supprot for $500

(Step 1)

A

Signed agreement

26
Q

Livertech is a computer business that sells computer hardware. As well as selling computers, it also supplies and installs the software to its customers and provides a technical support package over two years. Business commonly sells the supply and installation, and technical support in a combined goods and services contract.

Combined goods and services contract sells for $1600, but is sold separately the supply and installation, and if sold separately supply and installation is sold for $1500 and technical supprot for $500

(Step 2)

A

Supply and installation $1500

Technical support $500

27
Q

Livertech is a computer business that sells computer hardware. As well as selling computers, it also supplies and installs the software to its customers and provides a technical support package over two years. Business commonly sells the supply and installation, and technical support in a combined goods and services contract.

Combined goods and services contract sells for $1600, but is sold separately the supply and installation, and if sold separately supply and installation is sold for $1500 and technical supprot for $500

(Step 3)

A

Combined goods and services contract $1600

28
Q

Livertech is a computer business that sells computer hardware. As well as selling computers, it also supplies and installs the software to its customers and provides a technical support package over two years. Business commonly sells the supply and installation, and technical support in a combined goods and services contract.

Combined goods and services contract sells for $1600, but is sold separately the supply and installation, and if sold separately supply and installation is sold for $1500 and technical supprot for $500

(Step 4)

A

Supply and installation: $1500/$2000 * $1600 = $1200

Technical support: $500/$2000 * $1600 = $400

29
Q

Livertech is a computer business that sells computer hardware. As well as selling computers, it also supplies and installs the software to its customers and provides a technical support package over two years. Business commonly sells the supply and installation, and technical support in a combined goods and services contract.

Combined goods and services contract sells for $1600, but is sold separately the supply and installation, and if sold separately supply and installation is sold for $1500 and technical supprot for $500

(Step 5)

A

Supply and installation = On installation

Technical support = Over two years

30
Q

Livertech is a computer business that sells computer hardware. As well as selling computers, it also supplies and installs the software to its customers and provides a technical support package over two years. Business commonly sells the supply and installation, and technical support in a combined goods and services contract.

Combined goods and services contract sells for $1600, but is sold separately the supply and installation, and if sold separately supply and installation is sold for $1500 and technical supprot for $500

If conbined contract sold on 1 July 2017, how transaction presented in FSs at (31 December 2017)

A

SPL:
Revenue (1200 + 400*6/24) = 1300

Debit: Bank 1600
Credit: Revenue 1300
Credit: Deferred income 300

Deferred income in SFP
Split between current and non-current

31
Q

How to calculate contract asset in SFP for current year

A

(Price of contract * percentage completed to date) - amounts invoiced

32
Q

Revenue for one year when there’s a previous year?

A

Progress towards completion - measured progressed

33
Q

When revenue recognised?

A

When entity transfers a good or service to a customer

34
Q

Principal vs agent? (What is a principal)

A

Entity controls the goods or services

Revenue = gross revenue

35
Q

Principal vs agent? (What is an agent)

A

Entity arranges for goods or services to be provided by the otehr party

36
Q

Indicator that an entity controls goods or services before transfer and therefore classified as a principal? (Responsible)

A

Entity is responsible for fulfilling prmose to provide specificed good or service

37
Q

Indicator that an entity controls goods or services before transfer and therefore classified as a principal? (inventory)

A

Entity has inventory risk

38
Q

Indicator that an entity controls goods or services before transfer and therefore classified as a principal? (discretion)

A

Entity has discretion in establishing the price for the specified good or service

39
Q

Repurchase agreement examples?

A

A forward contract
A call option
A put option

40
Q

If repurchase price lower than original selling price?

A

Contract should be accounted for as an outright sale, with a right to return

41
Q

if customer is considered to have a significant economic incentive to exercise the option?

A

Entity should account for the agreement as a lease

42
Q

If repurchase price greater than original selling price?

A

Should be treated as a financing arrangement

43
Q

What is a consignment arrangement?

A

Third party does not take control of product transferred

44
Q

What happens if a product is held under a consignment arrangement?

A

Revenue should not be recognised
No cost of sales recognised
Inventory remains in books of entity

45
Q

What is a bill and hold arrangement/

A

Goods are sold but remain in possession of seller for a specified period of time

46
Q

For customer to have obtained control of a product?

A

Reason substantive
Product must be separately identified
Product must be ready for physical transfer
Entity cannot have ability to use/transfer product

47
Q

Additional warranty available to the custoemr at cost OR provides assurance beyond funciton intended?

A

IFRS 15 as additional performance obligation

48
Q

Standard warranty at no cost to customer?

A

Use IAS 37 Provisions

49
Q

Additional warranty that provides customer the right to an annual service of the machine for four years from the date of purchase. An annual service is usually charged at $2000 per annum? How should it be allocated?

A

$2000 * 4 years = $8000

50
Q

Sales with a right of return?

A

Company sells goods to customers and transfer control of product to customer with a right to return

51
Q

Revenue in a right to return?

A

Amount of consideration to which entity expects to be entitled

52
Q

Liabiltiy in a right to return?

A

A refund liability

53
Q

Asset in a right to return?

A

An asset for the right to recover products from customers on settling refund liability

54
Q

An example of a performance obligation satisfied over time?

A

The provision of a streaming services over a two-year period

55
Q

How should revenue be measured in progress of performance obligation?

A

Output method
Input method

56
Q

Revenue recognised in a contract asset or contract liability?

A

Revenue recognised based on % work certified to date

57
Q

Output method calcuation?

A

Work certified to date / Total contract revenue

As revenue recognised base don value to customer e.g. work certified

58
Q

Input method calculation?

A

Costs to date / Total estimated costs

Revenue recognised based upon amonuts entity has used e.g. costs incurred

59
Q

Contract asset and contract liability calculation?

A

Revenue recognised to date - Amounts invoiced to date = Contract asset/(liability)

60
Q

When something isn’t exposed to credit risk?

A

It is an agent

61
Q

When does contract not exist?

A

If each party can terminate the contract

IAS & IFRS Standards Overview (73 decks)

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