S1 - revenue recognition

Question 1

what are the revenue exclusions

Answer 1

borrowings
Shareholder contributions
Gains on disposal of assets or revaluations

Question 2

when is revenue recognised

Answer 2

identify a contract with a customer
Identify the performance obligations in the contract
Determine transaction price
Allocate the transaction price to the performance obligations in the contract
Recognise revenue when the entity satisfies a performance obligation

Question 3

what are construction contracts and treatment

Answer 3

special attention due to the size, duration and challenges on accounting for them
Revenue recognition basis is subjective
Treatment
recognise revenue when control passes
Determine about of revenue earned:
Output method - measures progress on the basis of direct measurement of goods transferred to date relative to the goods that remain to be transferred
Input method - measures progress on the basis of the entity’s efforts to date relative to total expected inputs required to achieve performance obligation

Question 4

what are onerous contracts

Answer 4

account for performance obligations as soon as they become apparent
Treated in line with impairment criteria

Question 5

what are the required disclosures

Answer 5

information that allows users to assess risks and rewards associated
Include amounts relating to revenue, impairment losses, value of contract assets and liabilities
Significant judgements must also be explained

Question 6

what is the approach to construction contracts questions

Answer 6

calculate expected contract outcome = contract price - total costs
Calculate profit or loss = work out % completion, revenue, profit
Calculate work in progress = revenue recognised - amounts invoiced
Calculate amount receivable = amounts billed to date - amounts received
SOFP
Contract asset
Trade receivables
SOCI
Revenue
Cost of sales
Profit