PFRS 15, Franchise, Consignment Flashcards
This is the core principle of PFRS 15. Revenue is recognized ….
in the period when performance obligation is satisfied
5 Step Model (COPAR)
- Identify Contract
- Identify Performance Obligations (PO)
- Determine Transaction Price (TP)
- Allocate TP to PO
- Recognize Revenue
STEP 1 : Identify Contract
- contract has commercial substance
- probable collection
- both parties → approved + committed
- specified → payment terms + rights to goods
What if parties can cancel without penalty? Is it a contract?
Yes
No
STEP 2 : Identify PO
- distinct and can stand alone
- separately identifiable and independent
Customization? 1 PO or Many PO?
Yes
1 PO
STEP 3 : Determine TP
- 3 ways
1. Variable Consideration
2. Non Cash Consideration → at FV
3. Consideration Payable to Customer
When to consider time value of money?
Yes
VARIABLE CONSIDERATION
1. Probability - Weighted Amount
2. Most - Likely Amount - if two possibilities
if more than 1 year
STEP 4 : Allocate TP
- Basis
stand-alone selling prices (SASP)
once SASP is allocated, ignore changes in it
If SASP is unknown, use the ff:
1. Adjusted Market Assessment
2. Expected Cost + Margin
3. Residual
Yes
2 Ways to Recognize Revenue
Over Time or Point in Time
It is a conditional right to receive payment.
Contract Asset
AR → unconditional right
Presentation of Contract Asset in BS
net of AR (PB)
Modification of contract. Retrospective or Prospective?
Prospective
Is “right of return” a performance obligation?
No
Is “Service-Type Warranty” a performance obligation?
Yes (separate from product itself)
Is “Assurance-Type Warranty” a performance obligation?
No (it is required by law since dapat lahat nang bibilhin is may warranty pero di siya PO)
Right to Use
- Point in Time or Over Time
Point in Time
Right to Access → Over Time
Seller Activities Affect Benefits
- Point in Time or Over Time
Right to Access → Over Time
If activities do not affect benefits = right to use (point in time)
Revenue Recognition
- Initial Franchise Fee
- Continuing Franchise Fee
Initial Franchise Fee → point in time
Continuing Franchise Fee → over time
IFF = at date of opening (XPN : date of signing)
Formula
- Initial Franchise Fee
Downpayment + PV of Note
NOTE : JE → Dr. Face of Note // Cr. Unearned Interest
Interest Income → based on PV of note
Formula
- Total Franchise Revenue
IFF + CFF
Formula
- Total Revenue
IFF + CFF + Interest Income
Formula
- Gross Profit
IFF less Direct Cost
Formula
- Net Income
GP + CFF + Interest Income less OPEX
Non Refundable Upfront Fee is a liability. When will it be recognized as revenue?
when performed
Product Cost or Period Cost
- from consignor to consignee
- from consignee to buyer
- product cost
- period cost
