Revenue from Contracts with Customers

Question 1

IFRS 15 Revenue recognition criteria

Answer 1

1) risk and rewards transferred
2) control lost by seller
3) collection reasonably assured
4) amount reasonably measured
5) costs associated with revenue reasonably measured

Question 2

ASPE 3400 revenue recognition criteria

Answer 2

1) risks and rewards transferred
2) revenue measured reliably
3) collection reasonably assured

Question 3

IFRS 5 step process to recognize revenue

Answer 3

1) identify the contract
2) identify the performance obligations
3) determine the transaction price
4) allocate the transaction price
5) recognize revenue

Question 4

Step 1: Identify the contract

Answer 4

• must have the following to be a contract: approved by all parties, identify goods and services, payment terms identified, has commercial substance, probable collection of consideration
• assess if need to combine 2 or more contracts– combine if one or more met: negotiated as package with single obligation, the consideration of one contract depends on the other, the goods/services in the contract are a single performance obligation
• assess for contract modifications– separate contract if both conditions met: change dur to additional of goods/services, or price increased by vendors selling price of added goods/services

Question 5

Step 2: Identify performance obligations

Answer 5

• a performance obligation is a promise to transfer one of the following: distinct good/service or a series of distinct good/services
• distinct good: 1) can the customer benefit from the good/service on its own (if year go to second question), 2) is the promise to transfer the good/service separately identified from other promises in contract (if yes than distinct)

Question 6

Step 3: Determine the transaction price

Answer 6

• variable consideration (expected value or most likely amount) (only recognized if subsequent change of reversal is unlikely)
• right of return (only recognized if estimated returns can be done)
• significant financing components (discount future payments if more than one year)
• non-cash consideration (measure at FV)
• consideration payable to customer (credit, coupon, voucher)

Question 7

Step 4: Allocate the transaction price

Answer 7

• allocate proportionally to each performance obligation
• allocate discount
• allocate variable consideration
• allocate changes in transaction price

Question 8

Step 5: Recognize revenue

Answer 8

• single point or period of time , satisfied when customer obtains control
• satisfied over time if: customer receives and consumes benefits at same time, vendors performance creates or enhances customer controlled asset, vendor performance does not create an asset with an alternative use to vendor
• over a period of time recognize as input or output method