Revenue

Question 1

What are the 5 steps of revenue recognition

Answer 1

1. identify the contract with the customer
2. identify performance obligations
3. determine the transaction price
4. allocate prices to obligations
5. recognise revenue

Question 2

When should transactions be recognised in statements

Answer 2

In the year they OCCUR

Question 3

What is revenue and what does it result from?

Answer 3

Simply income arising from business activities
Revenue results from
- sales of goods
- reciept of interest
- royalties
- dividends

Question 3

What criteria has to be met for revenue from a contract to be accounted for?

Answer 3

• parties involved have approved the contract and rights are identified
• payment terms can be identified
• the contract has commercial substance
• probable consideration of selling entity

Question 4

Examples are performance obligations

Answer 4

Promises to transfer goods or services
- sale of goods
- acting as an agent
- granting licenses
- grantings options to purchase goods

Question 5

What is the difference between a principal and an agent

Answer 5

principal - provides the good or services themselves
agent - external party delivering

Question 6

When determining transaction prices when can you estimate the amount expected to be received

Answer 6

when the transaction price is highly probable and that a significant reversal in the amount of revenue will not occur.

Question 7

When are appropriate times to recognise revenue

Answer 7

• customer has physical possession
• customer withholds the risks and rewards
• seller has a right to payment

Question 7

when the outcome of a contract cannot be reliably determined what revenue can be recognised

Answer 7

Recoverable costs from the customer

Question 8

How to account for warranties ?

Answer 8

• when providing an extra service should be treated as a separate performance obligation IFRS15
• when only provides assurance that the item will work as intended its recognised as a provision IAS37

Question 9

Variable consideration?

Answer 9

estimate the amount it expects to receive.
Only included if it is highly probable that a significant reversal in the amount of revenue will occur.

Question 10

Financing consideration?

Answer 10

adjust the amount of consideration with the time value of money.

Question 11

Non-cash consideration?

Answer 11

any non-cash consideration is measures at fair value of transfer. If not use the standalone price of the goods.