L7 | Revenue From Contracts With Customers

Question 1

What IFRS deals with Revenue from Contracts with Customers?

Answer 1

IFRS 15

Question 2

What standards did IFRS replace?

Answer 2

IAS 18 (revenue) and IAS 11 (Construction Contracts)

Question 3

What are the two sorts of income?

Answer 3

• Revenue
• Other income (or gains)

Question 4

From where does revenue arise?

Answer 4

Revenue arises in the course of an entity’s ordinary activities

Question 5

From where can other income or gains arise?

Answer 5

Other income or gains can arise as a result of, for example, revaluing an asset or selling fixed assets where the selling price is higher than the carrying amount

Question 6

What is the ‘core principle’ of IFRS 15?

Answer 6

An entity should recognise revenue to depict the transfer of promised goods or services to customers in an amount which reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.

Question 7

What are the 5 steps to achieve the principle of IFRS 15?

Answer 7

1. Identify the contract(s) with a customer
2. Identify the performance obligations in the contract
3. Determine the transaction price
4. Allocate the transaction price to the performance obligations in the contract.
5. Recognise revenue when (or as) the entity satisfies a performance obligation.