PFRS 15

Question 1

increases in economic benefits during the accounting period in the form of inflows or enhancements of assets or decreases of liabilities that result in increases in equity, other than those relating to contributions from equity participants.

Answer 1

Income

Question 2

encompasses both revenue and gains

Answer 2

Income

Question 3

income arising in the course of an entity’s ordinary activities.

Answer 3

Revenue

Question 4

An agreement between two or more parties that creates enforceable rights and obligations

Answer 4

Contract

Question 5

True or false

A contract can only be written by an entity’s customary business practice.

Answer 5

False because A contract can be written, oral, or implied by an entity’s customary business practice.

Question 6

A party that has contracted with an entity to obtain goods or services that are an output of the entity’s ordinary activities in exchange for consideration.

Answer 6

Customer

Question 7

PFRS 15 shall not be applied to the following:

Answer 7

Lease contracts (PAS 17 Leases);
Insurance contracts (PFRS 4 Insurance Contracts);
Financial instruments; and
Non-monetary exchanges between entities in the same line of business to facilitate sales to customers.

Question 8

_____________________

An entity recognizes revenue to _______________________________________ to which the entity expects to be entitled in exchange for those goods or services.

Answer 8

Core principle of PFRS 15

depict the transfer of promised goods or services to customers in an amount that reflects the consideration

Question 9

Steps in the recognition of revenue:

Answer 9

Step 1: Identify the contract with the customer
Step 2: Identify the performance obligations in the contract
Step 3: Determine the transaction price
Step 4: Allocate the transaction price to the performance obligations in the contract
Step 5: Recognize revenue when (or as) the entity satisfies a performance obligation

Question 10

Step 1: Identify the contract with the customer-
Requirements before a contract with a customer is accounted for under PFRS 15:

Answer 10

a. The contract must be approved and the contracting parties are committed to it;
b. rights and payment terms are identifiable;
c. The contract has commercial substance; and d. The consideration is probable of collection.

Question 11

True or false

No revenue is recognized if the contract does not meet the criteria above. Any consideration received is recognized as liability.

Answer 11

True

Question 12

Each promise in a contract to transfer a distinct good or service is treated as a _________________________

Answer 12

separate performance obligation.

Question 13

A good or service is distinct if:

Answer 13

(a) the customer can benefit from it, either on its own or together with other resources that are readily available to the customer (e.g., the good or service is regularly sold separately); and
(b) the good or service is separately identifiable (i.e., not an input to a combined output, does not significantly modify the other promises, or not highly interrelated with the other promises).

Question 14

True or false

A good or service that is distinct shall be combined with the other promises in the contract.
Combined promises are treated as a single performance obligation.

Answer 14

False- it should be not distinct

Question 15

True or false

The entity shall not determine the transaction price because this is the amount at which revenue will be measured.

Answer 15

False- shall be determine

Question 16

“the amount of consideration to which an entity expects to be entitled in exchange for transferring promised goods or services to a customer, excluding amounts collected on behalf of third parties (e.g., some sales taxes).” The consideration may include fixed amounts, variable amounts, or both

Answer 16

Transaction price

Question 17

The transaction price shall be allocated to each _________________ identified in a contract based on the relative stand-alone prices of the distinct goods or services promised to be transferred.

Answer 17

performance obligation

Question 18

the price at which a promised good or service can be sold separately to a customer.

Answer 18

stand-alone selling price

Question 19

If the stand-alone selling price is not directly observable, the entity shall estimate it using one or a combination of the:

Answer 19

Adjusted market assessment approach

Expected cost plus a margin approach

Residual approach

Question 20

the entity evaluates the market in which it sells goods or services and estimates the price that a customer in that market would be willing to pay for those goods or services.

Answer 20

Adjusted market assessment approach

Question 21

the entity forecasts its expected costs of satisfying a performance obligation and then add an appropriate margin for that good or service.

Answer 21

Expected cost plus a margin approach

Question 22

the entity estimates the stand-alone selling price as the total transaction price less the sum of the observable stand-alone selling prices of other goods or services promised in the contract.

Answer 22

Residual approach

Question 23

A performance obligation is satisfied when the control over a promised good or service is __________________________.

Answer 23

transferred to the customer

Question 24

measured at the amount of the transaction price allocated to the satisfied performance obligation.

Answer 24

Revenue

Question 25

Performance obligations are classified into the following:

Answer 25

1. Performance obligation that is satisfied over time 2. Performance obligation that is satisfied at a point in time

Question 26

For a ________________________, revenue is recognized over time AS the entity progresses towards the complete satisfaction of the obligation.

Answer 26

performance obligation that is satisfied over time

Question 27

A performance obligation is satisfied over time if one of the following criteria is met:

Answer 27

a. The customer simultaneously receives and consumes the benefits provided by the entity’s performance as the entity performs. b. The entity’s performance creates or enhances an asset that the customer controls as the asset is created or enhanced. c. The entity’s performance does not create an asset with an alternative use to the entity and the entity has an enforceable right to payment for performance completed to date.

Question 28

For each performance obligation satisfied over time, an entity shall recognize revenue over time by _______________________towards complete satisfaction of that performance obligation.

Answer 28

measuring the progress

Question 29

Examples of acceptable measurement methods:

Answer 29

1. Output methods (e.g., surveys of work performed) 2. Input methods (e.g., relationship between costs incurred to date and total expected costs)

Question 30

If efforts or inputs are expended evenly throughout the performance period, revenue may be recognized on a __________________________

Answer 30

straight- line basis.

Question 31

If the outcome of a performance obligation cannot be reasonably measured, revenue shall be recognized only to the ____________________________________

Answer 31

extent of costs incurred that are expected to be recovered.

Question 32

A performance obligation that is not satisfied over time is presumed to be _______________________________

Answer 32

satisfied at a point in time.

Question 33

For a performance obligation that is satisfied at a point in time, revenue is recognized WHEN the ____________________________

Answer 33

performance obligation is satisfied.

Question 34

Contract costs include the following:

Answer 34

Incremental costs of obtaining a contract Costs to fulfill a contract

Question 35

recognized as asset if they are recoverable and avoidable. As a practical expedient, the costs are recognized as expense if their expected amortization period is 1 year or less.

Answer 35

Incremental costs of obtaining a contract

Question 36

if within the scope of PFRS 15, they are recognized as asset if they are: (a) directly related to a contract, (b) generate or enhance resources, and (c) recoverable.

Answer 36

Costs to fulfill a contract

Question 37

A contract where either party has performed is presented in the ___________________________ as a contract liability, contract asset or receivable.

Answer 37

statement of financial position

Question 38

is an entity’s obligation to transfer goods or services to a customer for which the entity has received consideration (or the amount is due) from the customer.

Answer 38

Contract liability

Question 39

is an entity’s right to consideration in exchange for goods or services that the entity has transferred to a customer when that right is conditioned on something other than the passage of time.

Answer 39

Contract asset

Question 40

is an entity’s right to consideration that is unconditional.

Answer 40

Receivable

Question 41

What is PFRS 15?

Answer 41

Revenue from Contracts with Customers