IFRS 15 revenue

Question 1

revenue

Answer 1

revenue is income arising in the ordinary course of the business

Question 2

5 step process

Answer 2

• identify the contract
• identify the separate performance obligations within a contract
  *determine the transaction price
  *allocate the transaction price to the performance obligations in the contract
• recognise revenue when a performance obligation is satisfied

Question 3

contract

Answer 3

contract is an agreement between two parties that creates rights and obligations

Question 4

identify the contract

Answer 4

• the parties have approved the contract and each party’s rights can be identified
• payment terms can be identified
  *the contract has commercial substance
• it is probable that the entity will be paid

Question 5

performance obligation

Answer 5

performance obligations are promises to transfer distinct goods or services to a customer

Question 6

distinct performance obligation

Answer 6

a promised good or service is distinct if
* the customer can benefit from the good or service on its own or by using resources that are readily available
*the promise to provide the good or service is separately identifiable from other contractual promises

Question 7

performance obligation satisfied over time

Answer 7

• the customer simultaneously receives and consumes the benefits provided by the entity’s performance as the entity performs
• the entity’s performance creates or enhances an asset and 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 enforceable right to payment for performance completed to date

Question 8

performance obligation satisfied at a point in time

Answer 8

• the entity has a present right to payment for the asset
• the customer has legal title to the asset
• the entity has transferred physical possession of the asset
• the customer has significant risks and rewards of ownership of the asset
• the customer has accepted the asset

Question 9

consignment sales

Answer 9

if the control of the goods has not passed to the dealer then the transaction is known as consignment arrangement
# product is controlled by the entity until a specified event happens
# the entity can require the return of the product
# the dealer has no unconditional obligation to pay for the product

Question 10

sale and repurchase

Answer 10

agreement where an entity sells an asset but retains a right to repurchase the asset at some point in future

Question 11

forward

Answer 11

an entity’s obligation to repurchase the asset

Question 12

call option

Answer 12

an entity’s right to repurchase the asset

Question 13

put option

Answer 13

an entity’s obligation to repurchase the asset at customer’s request