Handbook Questions
The first step in the process for revenue recognition is to:
identify the contract with customers
Mark accepted an order to supply 10 bacon and cheese hamburgers to Jay Co. The price per hamburger is $5 each, and Mark only supplied 5 hamburgers out of the 10 to Jay Co. How much should Mark recognize as revenue?
$25
Revenue is recognized immediately after the payment is recieved.
False
What is a performance obligation under IFRS 15?
A responsibility to provide a specific service or good.
The second step in the process for revenue recognition is to:
identify the separate performance obligations in the contract
On June 1, 2023, Jason accepted an order to supply 15 apples to a customer through a homegrown farm. On June 15th, 2023, the 15 apples were successfully delivered to the customer. On what date should Jason recognize the revenue?
June 15, 2023
According to IFRS 15, if a performance obligation is not satisfied over time, an entity satisfies the performance obligation at a point in time.
True
Give and example of variable consideration?
Sales discounts
The fourth step in the process for revenue recognition is to:
Allocate the transaction price to the separate performance obligations
what criteria must be met for a good or service to be considered distinct and accounted for a separately in a contract.
It is separately identifiable and the customer can benefit from it on its own or together with other resources
Contract modification under IFRS 15 are always treated as separate contracts and require a distinct performance obligations.
False
How should a company determine the transaction price for each different performance obligation?
Determine based on the standalone selling price.
what criteria must be met for a good or service to be considered distinct and accounted for a separately in a contract.
It is separately identifiable and the customer can benefit from it on its own or together with other resources
A customer purchases custom-made furniture from Company C. According to the contract, the customer will pay 40% upfront and the remaining 60% upon delivery. When should Company C recognize revenue under IFRS 15?
When the furniture is delivered to the customer
According to IFRS 15, goods and services are considered assets, when they are received and used, even if their control is momentary
True
What is the significatn of the concept of "control" when determining when to recognize revenue?
Reflects the transfer of control of goods or services to the customer.
Under IFRS 15, which section talks about breakage, and briefly explain what it is.
IFRS B44.47
Breakage is an accounting term that identifies revenue recognized from services that are paid for but not used. The most familiar example of breakage is in gift cards. Many retailers sell gift cards because they know that a certain percentage of the gift cards they sell will never be redeemed.
Buildit, entered into a contract to construct a building for $1000000. the contract includes 2 seprate services. construction service (80%) and landscaping services (20%). at the end of first year buildit completed 60% of the construction services and 40% of the landscaping services. How much revenue should they record at the first year end.
560,000
IFRS 15 allows revenue to be recognized over time if the customer simultaneously receives and consumes the benefits provided.
True
A software company sells a software license that includes a promise of future updates and support. How should the company allocate the transaction price under IFRS 15.
Based on standalone selling prices of the license, updates and support.