week 2

Question 1

what happens if there are flexible (less reliable) performance measures

Answer 1

• easier for management to manipulate the reported performance

Question 2

issues with early revenue recogntion

Answer 2

• predicting revenue
  prompts the three issues
  1. measurement
  2. timing
  –> requires more estimates and judgements from maangement
  –> FS will be less accurate as a result

Question 3

what is IFRS 15

Answer 3

Revenue from contraccts with customers

Question 4

five steps of revenue recogntion

Answer 4

1. identify the contract w/ customer
2. identify the POs
3. determine the transaction price
4. allocation trasnaction price to PO
5. recognize revenue in accordance w/ performance

Question 5

Three revenue issues (in rev rec)

Answer 5

1. timing of revenue rec
2. measurement
3. more than on PO

Question 6

what is significant financing component

Answer 6

• when timing of payment differs from timing of delivery of goods/services
• firms need to recognize the revenue at the time customer has paid in for cash
  –> customer pays for good/service in two years instead of now
  –> need to PV it back

Question 7

IFRS 15 dealing w/ trade credit

Answer 7

• companies must accout for TVM if there is significant
• using B2B trade credit: delaus are shorter, transaction volume is high, impact is small
  requirement: as long as the businesses get paid wihtin a year, they don’t need to calculate the financing effect (discount for future pmts)