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    Certifr S07-Ifrs 15 Part2

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    Certifr S07-Ifrs 15 Part2

    Uploaded by

    sohagy21
    5 views13 pages

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    Certifr s07-Ifrs 15 Part2

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    5 views13 pages

    Certifr S07-Ifrs 15 Part2

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    sohagy21

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    of 13

    CertIFR Course

    IFRS 15
    Contract costs
    Costs of obtaining a contract

    Incremental costs that are incurred when obtaining a contract are


    treated as an asset if the entity expects to recover the costs.
    These costs are limited to the costs that the entity would not have
    incurred if the contract had not been successfully obtained.
    Incremental costs can be expensed if the associated amortisation
    period would be 12 months or less.
    CertIFR Course

    IFRS 15
    Contract costs
    Costs of fulfilling a contract
    Costs to fulfil a contract are only capitalised as an asset if all of the
    following are satisfied:

    Costs directly relate to the contract.


    Costs generate/enhance resources of the entity that will be used in
    satisfying performance obligations in the future.
    Costs are expected to be recovered.
    CertIFR Course

    IFRS 15
    Contract costs
    Costs of fulfilling a contract

    These costs include direct labour, direct materials and the allocation of
    overheads that related directly to the contract.

    Capitalised costs are amortised on a systematic basis consistent with


    the pattern of transfer of goods to which the asset relates.
    CertIFR Course

    IFRS 15
    Presentation of contracts with customers

    Presentation in financial statements

    Contracts with customers are presented in the statement of financial


    position as either a contract asset, a receivable or a contract liability,
    depending on the relationship between the entity's performance and
    the customer's payment.
    CertIFR Course

    IFRS 15
    Presentation of contracts with customers
    A contract asset arises where the entity has transferred a good or
    service to the customer and its right to consideration is conditional on
    something other than the passage of time.
    A receivable is recognised when an entity's right to consideration is
    unconditional because only the passage of time is required before
    payment of the consideration is due.
    A contract liability arises where a customer has paid consideration to
    an entity (or is due to) prior to the transfer of the related goods or
    services.
    CertIFR Course

    IFRS 15
    Example
    Lingard Co sells a cable TV system to Monica under the following terms on 1 January
    20X5:
    - Monica has to pay a monthly fee of $80 for 12 months.
    - Monica receives a cable TV set top box and access to all the TV channels.
    - The contract does not contain any other conditions and, once signed, the receipt
    of the consideration is unconditional.
    - Lingard Co sells the set top box by itself for $250 and charges monthly access to
    the TV service without the set top box for $65 a month.
    - What amount of revenue should Lingard Co recognise in the year ended 31 March
    20X5?
    CertIFR Course

    IFRS 15
    CertIFR Course

    IFRS 15
    CertIFR Course

    IFRS 15
    CertIFR Course

    quick quiz
    1 - AB Co has recently entered into a contract with a customer to provide a licence to
    use a standard software package. After considering other available service providers,
    the customer has also engaged AB Co (as part of the same contract) to install the
    software on the customer's computers and provide technical support for three years.
    How many performance obligations are there in the contract?

    A: 1 C: 3
    B: 2 D: 4
    CertIFR Course

    quick quiz
    2 - CD Co has contracted to build a property for a customer for an agreed fee of
    $10million. If the construction is completed by a certain date, a bonus of $2million
    becomes payable by the customer to CD Co. There is a 75% chance of the construction
    being completed by the specified date. What is the transaction price?

    A : 8 Millions $ C : 10 Millions $
    B : 11.5 Millions $ D : 12 Millions $
    CertIFR Course

    quick quiz
    3 – EF Co Provides a wireless router and 12 month’s superfast broadband package to
    customer for 220$ payable in advance. A customer buying the router separately
    would pay $30 and A customer buying the broadband package separately would pay
    $20 per month.
    How much of the transaction price is allocated to performance obligation to provide
    the router?
    A : $24.44 C : $220
    B : $30 D : $270
    Total price if separately = 30+(20×12) = $270
    router price if package = 30/270×220 = $24.44
    CertIFR Course

    quick quiz
    4 – Does the Job Co, a software company, has an accounting year end of 31 December.
    It makes a sale for $500,000 on 30 June 20X4, to a customer, Brady. This amount
    includes $470,000 for software and $30,000 for support services for the two years
    commencing 1 July 20X4. How much revenue should Does the Job Co recognise in the
    statement of profit or loss in the year ended 31 December 20X4?

    A : $500,000
    B : $485,000
    C : $477,500
    D : $470,000

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