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IFRS 15 sets out a five step model for the recognition of revenue
Revenue from contracts with customers (IFRS 15)
On 1 January 20X4
The entries in the books of TeleSouth will be:
DEBIT Receivable (unbilled revenue ) $460.80
CREDIT Revenue $460.80
Being recognition of revenue from the sale of the handset
On 31 January 20X4
The monthly payment from Angelo is split between amounts owing
for network services and amounts owing for the handset.
DEBIT Receivable (Angelo) $200
CREDIT Revenue (1,939.20/12) $161.60
CREDIT Receivable (unbilled revenue )(460.80/12) $38.40
Being recognition of revenue from monthly provision of network
services and ‘repayment’ of handset
Common types of transaction
Warranties
Constructing a:
•Bridge
•Building
•Dam
•Ship.
Performance obligations satisfied over time
Where the entity undertakes a contract with performance
obligations satisfied over time, such as construction of a building,
the entity must determine what to include as revenue and costs in
each accounting period.
Performance obligations satisfied over time
The amount of payment the entity is entitled to corresponds to the
mount of performance complete to date which approximates to the
costs incurred in satisfying the performance obligations plus a
reasonable profit margin.
Required
How much is recognised in Non-current liabilities in respect of the
grant as at 30 June 20X2?
•$60,000
•$30,000
•$210,000
•$270,000
Lecture example
Answer C
The grant is treated as deferred income:
$
1 January 20X2 Cash received 300,000
20X1-20X2 year Credited to profit or loss (300,000/ 5 X 6/12) (30,000)
30 June 20X2 c/d 270,000
The $270,000 deferred income at 30 June 20X2 must be split into current and non-current
elements:
20X2-20X3 year Credited to profit or loss (300,000/ 5) = current amount (60,000)
30 June 20X3 c/d = non-current amount at 30 June 20X2 210,000
B62
Which of the following are acceptable methods of accounting for a
government grant relating to an asset in accordance with IAS 20
Accounting for Government Grants and Disclosure of Government
Assistance?
(i)Set up the grant as deferred income
(ii)Credit the amount received to profit or loss
(iii)Deduct the grant from the carrying amount of the asset
(iv)Add the grant to the carrying amount of the asset
A. (i) and (ii)
B. (ii) and (iv)
C. (i) and (iii)
(i) (iii) and (iv) (2 marks)
B62
Answer C
The grant can be treated as deferred income or deducted from the
carrying amount of the asset. It cannot be credited directly to profit or
loss.
Accounting treatment - Repayment of grants
A government grant that becomes repayable is accounted for as a
change in accounting estimate in accordance with IAS 8.