Revenue Renognition

Question 1

What is the five step model to revenue reongition

Answer 1

1. Identify contract with the customer
2. Identify performance obligations
3. Determine the transaction price
4. Allocate transaction price to the obligations
5. Recognise value when obligations have been met

Question 2

What are the four conditions of a contract with a customer?

Answer 2

1. Have the rights of both parties been identified
2. Have the payment terms been identified?
3. Has the contract got commercial substance?
4. Is it probable the benefits from the contract will be received

Question 3

How to deal with tender fees?

Answer 3

Should be expensed rather than capitalised, unless the business expect to recover the costs

Question 4

What disclosure is required for revenue recognised over time

Answer 4

Nature
Amount
Timing
Uncertainty

Any assets and stage of completion required

Question 5

How do we deal with a change in contract?

Answer 5

Brand New contract if:
Increase in scope AND
Increase in price based on market rate

Otherwise treat it as a modification to the existing contract