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AFA
Revenue - Slides
| Question | Answer |
|---|---|
| difference between IAS 18 and IFRS 15 | IAS 18 - recognise revenue when all risks and rewards transferred IFRS 15 - recognise revenue when control of assets is transferred |
| revenue definition | income arising in course of an entity's ordinary activities |
| revenue gives rise to | increase in equity |
| core principles of IFRS 15 | recognise revenue to depict transfer of goods to customer in amount that reflects consideration to which company expects to be entitled to |
| revenue main area for | earnings management |
| 5 steps of revenue recognition | 1. identify the contract 2. identify performance obligations 3. determine transaction prices 4. allocate transaction to performance obligation 5. recognise revenue as performance obligations satisfied |
| definition of contract | contract is agreement between 2 or more parties that contains enforceable rights |
| requirements of contract | - commercial substance and probable payment - parties have approved contract and committed to obligations - entity can identify each party's rights and payment terms |
| what is a performance obligation | a promise in a contract to transfer a good or service |
| treatment of performance obligations | distinct POs accounted for separately. combines goods and services until they are distinct |
| performance obligation is separate | if entity sells separately regularly |
| what is the transaction price | amount of consideration entity expects to be entitled to receive. can include variable consideration |
| non cash consideration measured at | fair value |
| variable consideration arises | as a result of discounts, rebates, refunds, performance payments |
| two ways for entity to estimate consideration entitlement | 1. use probability weighted estimate 2. most likely amount |
| when is variable consideration included | highly probable significant reversal in revenue will not occur |
| how is transaction price allocated to performance obligations | based on standalone selling prices of distinct goods and services |
| how is variable consideration allocated | can be allocated across all performance obligations or to individual POs |
| when is performance obligation satisfied | when transfer of goods or services occurs |
| criteria for control transferring 'over time' (1 needs to met) | - simultaneously receives asset and consumes benefit - seller performance creates or enhances asset controlled by customer - asset has no further use to seller |
| two reasons companies may overstate revenue | - to increase profits and possibly share price - to get a bonus or commission |
| qualitative characteristics of financial reporting | relevance faithful representation comparability verifiability |
Created by:
amyperston
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