Long-term Contracts
What are the two methods called that you can apply to long-term contracts?
Percentage-of-completion method and completed contract method.
What accounting method does the asset-liability approach adopt?
IFRS
Which accounting method does the earnings approach adopt?
ASPE
Fill in the blank. IFRS ___ provides specific guidance on revenue recognition issues
15
When do you use the completed-contract method?
When the contract/project date is to be determined.
Does the contract always need to be written, under step 1 (Identify the contract)?
No, it can be written, implied or oral.
Does the seller have any involvement or control over the goods?
No.
Name one revenue recognition issue.
1) Repurchase agreements
2) Bill and hold
3) Principal-agent relationships
4) Consignments
Which long-term contract method is used when revenue and expenses are assured and can be recognized as time goes on instead of waiting for the contract to be complete.
Percentage-of-Completion Method
What is one way revenue is recognized under the Asset-Liability approach?
Revenue is recognized when the performance obligation is satisfied or when the goods or services are transferred to the customer.
Name one of the ways revenue is recognized.
1) Performance obligation is satisfied
2) Revenue is earned
3) Risks and rewards have been transferred
List two indicators of control.
Any 2 of the following:
1) The company has a right for payment of the asset
2) The company has transferred legal title of the asset
3) The company has transferred the physical product to customer
4) The customer has risks and rewards of ownership
5) The customer has accepted the asset
Name a type of requirement that does not apply to all contracts with customers? (Multiple answers)
Anyone of the following:
1) Lease contracts
2) Insurance contracts
3) Financial instruments and other contractual rights or obligations
4) Certain non-monetary exchanges
List at least three steps in the five-step Asset-Liability process.
1) identify the contract
2) identify performance obligation
3) determine the price
4) allocate price to performance obligation(s)
5) recognize revenue (journal entry(ies))
Secret Question.
Good Pick!
IFRS 15 contains application guidance for: (List 3)
1) Contract costs
3) Sale with a right of return
3) Warranties
4) Principal versus agent considerations
5) Customer options for additional goods or services
6) Customers’ unexercised rights
7) Non-refundable upfront fees
8) Licensing
9) Repurchase agreements
10) Consignment arrangements
11) Bill-and-hold arrangements
12) Customer acceptance