IFRS 15 Specific Transactions Flashcards
Principal?
Entity that controls good/service before transferred to customer
Revenue in principal?
Gross consideration
Agent?
The entity arranges for the other party to provide the good/service.
Revenue in agent?
Revenue = fee of commission
Reason entity is an agent? (contract)
Another party is responsible for fulfilling the contract
Reason entity is an agent? (inventory)
Entity does not have inventory risk
Reason entity is an agent? (discretion)
Entity does not have discretion in establishing prices for other goods/services
Reason entity is an agent? (consideration)
Consideration is a form of commission
Reason entity is an agent? (credit risk)
Entity is not exposed to credit
Repurchase agreement?
A contract in which an entity sells an asset and also promises or has the option to repurchase the asset.
On 1 January, Anderson enters into a contract with Tanner for the sale of an excavator for $350,000. Under the terms of the contract, Anderson has an option to repurchase the excavator for $385,000 on or before 31 December. Tanner pays the entity $350,000 on 1 January. On December 31 the option lapses unexercised.
Initial (repurchase agreement)
Cash $350000
Financial liability $350000
On 1 January, Anderson enters into a contract with Tanner for the sale of an excavator for $350,000. Under the terms of the contract, Anderson has an option to repurchase the excavator for $385,000 on or before 31 December. Tanner pays the entity $350,000 on 1 January. On December 31 the option lapses unexercised.
Derecognition (repurchase agreement)
Financial liabiltiy 385000
Revenue 385000
On 1 January, Anderson enters into a contract with Tanner for the sale of an excavator for $350,000. Under the terms of the contract, Anderson has an option to repurchase the excavator for $385,000 on or before 31 December. Tanner pays the entity $350,000 on 1 January. On December 31 the option lapses unexercised.
Interest expense (repurchase agreement)
Interest expense 35000
Financial liability 35000
Bill and hold arrangement?
A contract in which the entity bills a customer for a product that it has not yet delivered to the customer.
When is control transferred in a bill and hold?
When the product is shipped or delivered to the customer
Customer obtained control of bill and hold arrangement? (substantive)
Substantive reason for the bill-and-hold arrangement
Customer obtained control of bill and hold arrangement? (identified)
Separately identified as belonging to a customer
Customer obtained control of bill and hold arrangement? (transfer)
Currently ready to transfer product to a customer
Customer obtained control of bill and hold arrangement? (use product)
Entity cannot use the product or direct it to another customer
When should contract include TVM?
When there is a significant financing component
If consideration has not been transferred?
Revenue and trade receivable can’t be recognised
Sale in consignment? (control)
Dealer or distributor has obtained control of product
Consignment in consignment? (control)
Dealer or dinstributor has not obtained control of product
When sale in consignment recognised?
Recognise revenue when the product is shipped or delivered to the dealer or distributor
