Revenue

Question 1

Revenue recognition 5 steps

Answer 1

1. Contract w/ customer
2. Performance obligation(s)
3. Transaction price
4. Allocation of transaction price to performance obligations
5. Recognise revenue when obligations are satisfied

Question 2

IFRS 15

Answer 2

Applies: when a contract exists and:
all parties approve, entity can identify each party’s rights, identify payment terms, has commercial substance (risk, timing, future cash flows) and it is probable the entity can make payment.

Question 3

IFRS 15 criteria implications

Answer 3

If met then recognise as revenue. If not met yet deferred income until it is met if consideration already received.

Question 4

Determining transaction price

Answer 4

The amount the entity expects to be ‘entitled’ to.

If non-cash use the value of services given in return
Variable consideration = include in transaction price if it is highly probable

Question 5

Recognising revenue over a period of time

Answer 5

An entity can recognise revenue received over time if (any of the below):

The customer simultaneously receives and consumes the benefit.
The entity’s performance enhances or creates the asset that the customer controls.
The item is bespoke and has no alternative use to the entity.