IFRS 15 Specific Transactions

Question 1

Principal?

Answer 1

Entity that controls good/service before transferred to customer

Question 2

Revenue in principal?

Answer 2

Gross consideration

Question 3

Agent?

Answer 3

The entity arranges for the other party to provide the good/service.

Question 4

Revenue in agent?

Answer 4

Revenue = fee of commission

Question 5

Reason entity is an agent? (contract)

Answer 5

Another party is responsible for fulfilling the contract

Question 6

Reason entity is an agent? (inventory)

Answer 6

Entity does not have inventory risk

Question 7

Reason entity is an agent? (discretion)

Answer 7

Entity does not have discretion in establishing prices for other goods/services

Question 8

Reason entity is an agent? (consideration)

Answer 8

Consideration is a form of commission

Question 9

Reason entity is an agent? (credit risk)

Answer 9

Entity is not exposed to credit

Question 10

Repurchase agreement?

Answer 10

A contract in which an entity sells an asset and also promises or has the option to repurchase the asset.

Question 11

On 1 January, Anderson enters into a contract with Tanner for the sale of an excavator for $350,000. Under the terms of the contract, Anderson has an option to repurchase the excavator for $385,000 on or before 31 December. Tanner pays the entity $350,000 on 1 January. On December 31 the option lapses unexercised.

Initial (repurchase agreement)

Answer 11

Cash $350000
Financial liability $350000

Question 12

On 1 January, Anderson enters into a contract with Tanner for the sale of an excavator for $350,000. Under the terms of the contract, Anderson has an option to repurchase the excavator for $385,000 on or before 31 December. Tanner pays the entity $350,000 on 1 January. On December 31 the option lapses unexercised.

Derecognition (repurchase agreement)

Answer 12

Financial liabiltiy 385000
Revenue 385000

Question 13

On 1 January, Anderson enters into a contract with Tanner for the sale of an excavator for $350,000. Under the terms of the contract, Anderson has an option to repurchase the excavator for $385,000 on or before 31 December. Tanner pays the entity $350,000 on 1 January. On December 31 the option lapses unexercised.

Interest expense (repurchase agreement)

Answer 13

Interest expense 35000
Financial liability 35000

Question 14

Bill and hold arrangement?

Answer 14

A contract in which the entity bills a customer for a product that it has not yet delivered to the customer.

Question 15

When is control transferred in a bill and hold?

Answer 15

When the product is shipped or delivered to the customer

Question 16

Customer obtained control of bill and hold arrangement? (substantive)

Answer 16

Substantive reason for the bill-and-hold arrangement

Question 17

Customer obtained control of bill and hold arrangement? (identified)

Answer 17

Separately identified as belonging to a customer

Question 18

Customer obtained control of bill and hold arrangement? (transfer)

Answer 18

Currently ready to transfer product to a customer

Question 19

Customer obtained control of bill and hold arrangement? (use product)

Answer 19

Entity cannot use the product or direct it to another customer

Question 20

When should contract include TVM?

Answer 20

When there is a significant financing component

Question 21

If consideration has not been transferred?

Answer 21

Revenue and trade receivable can’t be recognised

Question 22

Sale in consignment? (control)

Answer 22

Dealer or distributor has obtained control of product

Question 23

Consignment in consignment? (control)

Answer 23

Dealer or dinstributor has not obtained control of product

Question 24

When sale in consignment recognised?

Answer 24

Recognise revenue when the product is shipped or delivered to the dealer or distributor

Question 25

When consignment in consignment recognised?

Answer 25

Recognise revenue when the dealer or distributor sells the product to a customer

Or when dealer obtains control of product

Question 26

When recognising a provision for contingent asset?

Answer 26

Must be virtually certain (e.g. expected to recover is not recognised)