REVENUE RECOGNITION

Question 1

Five Step Approach

Answer 1

Step
1: Identify the contract with the customer
2. identify the separate performance obligations in the contract
3. Determine the transaction price
4. Allocate the transaction price to the separate performance obligations
5. Recognise revenue when or as the entity satisifies each performance obligation

Question 2

identify the contacts with the customers

Answer 2

criteria -
1. parties approved & committed to perform
2. G&S identified
3. Payment terms identified
4. commercial substance
5. probable

Question 3

treated as new contract

Answer 3

when scope and price increases

Question 4

Identify the Separate Performance Obligations in the contract

Answer 4

Separately Identifiable
- does not integrate
- does not customise or modify
- does not depend or related

Not separately identifiable
- highly interrelated or interdependent
- significant service of integrating

Question 5

Determine the transaction price

Answer 5

Variable Consideration
- estimate
significant financing
- cash
Non cash consideration
-FV at contract inception
Consideration payable to a customer
- treated as reduction in TP

Question 6

Allocate the Transaction Price to the Performance Obligations in the Contract

Answer 6

1. Standalone selling price
   2.Discounts
2. Variable Consideration
3. Transaction Price Changes

Question 7

Recognise Revenue when or as the entity satisfies a performance obligation

Answer 7

Satisfied over time
-output method
-input method

Satisfied at a point in time