Revenue and grants Flashcards

1
Q

Revenue

A

received when control transferred (goods delivered/services provided), not when cash received

elements:
1- Identify customer contract-(terms approved by buyer and seller)
2-identify performance obligations (PO)- (goods to be delivered/services to be provided)
3-Determine price(future payments(discounted to PV), non cash consideration at FV, variable consideration: most likely outcome/expected value)
4-Allocate price to PO- (g/s provided together , base of standalone prices, overall discount applied evenly to both)
5- recognise revenue when PO satisfied- goods delivered to customer/customer legally owns goods, service provided to customer
5-Recognise revenue when PO satisfied

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

Grants

A

Income recognised when conditions of grant will be met , not when cash received

accounting policy choice:

1) Capital : Recognise grant against cost of asset
- when grant received Cr PPE, Dr cash
- future expenses reduced as Depr will lower

2) Income: Recognise income over the period which the grant conditions are met
- when grant Recieved : Cr deferred income, Dr cash
- Record over grant condition period: Dr deferred income, CR P&L

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

customer pays before goods delivered/service provided (before PO satisfied)

A

contract liability (deferred income)

when cash received : Cr contract liability, Dr cash

when goods delivered/ services provided: Cr Revenue , Dr contract liability

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

customer pays within 12 m after po satisfied

A

contract asset (accrued income) if still some work to be performed

  • when goods delivered/services provided Cr revenue dr contract asset
  • when cash received (Cr contract asset) Dr cash
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

customer pays within 12m after (PO satisfied) (no further work)

A

receivable if no further work to be performed or if invoice sent

  • when goods delivered/services provided: Cr revenue Dr receivable
  • when cash received : Cr receivable Dr cash
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

Customer pays LATER than 12m after PO satisfied

A

Price needs to be discounted to PV using discount factor/effective interest rate
-Cr revenue Dr recievable

receivable subsequently measured using amortised cost

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

PO satisfied over time

A

-constructing/creating asset for customer

revenue recognised based on progress to competition if;

  • asset has no alternative use
  • right to receive payment for work complete
  • output method: value of goods/services transferred as % of total
  • Input method: cost of goods/services transferred as % of total

if unable to measure outcome of contract : revenue=recoverable costs incurred

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

sells asset and holds option/obligation to repurchase it

A

Repurchase price> original selling price :

  • customer does not obtain control of asset as control limited by repurchase option
  • substance over form: loan with asset used as security
  • cash received is a loan (financial liability)
  • additional amount paid is interest expense
  • asset continues to be recognised

repurchase price < original selling price
- treat as lease

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

sells asset and has obligation to repurchase it at customer’s request

A

repurchase price> original selling price
-cash received is a loan

repurchase price < original selling price:
-treat as sale with right of return

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

warranties and sale with right of return

A

standard warranty is not a distinct PO(may require a provision)

additional warranty is a distinct PO

sales with ror

  • do not recognise revenue and cost of sales for items expected to be returned
  • refund liability for expected returns
  • asset for CA of inventory to be returned
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

bill and hold

principal v agent

A

bill and hold:
-customer does not have pace to receive goods so seller holds goods for customer
-Revenue recognised if:
substantive reasons for goods to be held
goods identified as belonging to customer and ready to be transferred

principal v agent:

  • agent business selling goods/services which principal business will provide to customer
  • agent only recognises commission as revenue
  • principal recognises revenue when PO to end customer is satisfied
How well did you know this?
1
Not at all
2
3
4
5
Perfectly