Revenue

Question 1

IFRS 15 - Revenue from Contracts with Customers

Answer 1

Income arising in the course of and entity’s ordinary activities.

Does NOT include.
Proceeds from sale of NCA
Sales Tax
Amounts collects on behalf of other.

Question 2

5 Step Recognition

Answer 2

1 - Identify the contract with the customer

2 - Identify the performance obligations

3 - Determine the transaction price

4 - Allocate the transaction price to the performance obligations

5 - Recognise revenue when the entity satisfies the performance obligation

*control is passed (delivered)

Question 3

Presentation

Answer 3

Contracts with customers will be presented as a contact liability, contact asset or receivable depending on the relationship between the entity performance and the customers payment.

Contract Liability: Customer has paid and amount of consideration prior to the entity performing.

Contract asset: Right to consideration is conditional eg. future performance. IFRS 8 Financial Instruments.

Question 4

Substance over Form

Answer 4

Sale or Return - Car dealerships
Sale and purchase agreements
Consignment inventory

Question 5

Consignment Inventory

Answer 5

Who bears the risk.

Question 6

Construction Contracts

Answer 6

Prudence would require no income or profits until actually realised.

Question 7

Accounting for Construction Contracts

Answer 7

1. Forecast the outcome of the contract - Is it profitable. (CALC: CONTRACT PRICE - COSTS TO DATE - ESTIMATE TO FINISH = PROFIT(LOSS)
2. Calculate the level of completion (WORK COMPLETE / CONTRACT PRICE)
3. Complete the P/L using COS as balancing figure (consider previous periods) (Revenue - COS = PROFIT
4. Complete SFP balance

Question 8

Contract asset working

Answer 8

Revenue recognised less amounts billed.