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Case 3 A.: Analyze The Five Steps of Model of Revenue Recognition

The document outlines the five steps of the revenue recognition model: 1) Identify the contract with a customer 2) Identify the performance obligations 3) Determine the transaction price 4) Allocate the transaction price to the obligations 5) Recognize revenue when obligations are satisfied It also provides descriptions and accounting treatments for changes in accounting policies, estimates, and prior period errors. For a worked example, it computes basic and diluted earnings per share.

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44 views

Case 3 A.: Analyze The Five Steps of Model of Revenue Recognition

The document outlines the five steps of the revenue recognition model: 1) Identify the contract with a customer 2) Identify the performance obligations 3) Determine the transaction price 4) Allocate the transaction price to the obligations 5) Recognize revenue when obligations are satisfied It also provides descriptions and accounting treatments for changes in accounting policies, estimates, and prior period errors. For a worked example, it computes basic and diluted earnings per share.

Uploaded by

Arc Angel
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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CASE 3

A. Required
Analyze the five steps of model of revenue recognition.

Step 1: Identify the contract with a customer


Step 2: Identify the performance obligations in the contract
Step 3: Determine the transaction price
Step 4: Allocate the transaction price to the performance obligations in the contract
Step 5: Recognize revenue when (or as) the entity satisfies a performance obligation

B. Complete the table.


Scope of Description Accounting Effect of
PAS 8 Treatment Adjustment in
BS/PL
Change in accounting Change a policy Retrospective If a retrospective
policy when the update is application means adjustment in
required by the that entity accounting policy is
applicable accounting implements the applied, the
framework. change in accounting organization shall
policy as though it adjust the opening
had always been balance of each
applied. affected equity
portion for the
earliest previous
period presented and
the other comparative
amounts disclosed for
each previous period
presented as though
the new accounting
policy had already
been applied.
Change in accounting amount to be debited The IASB prohibits A change that has the
estimate or credited on items retrospective effect of adjusting the
for which no precise treatment of changes carrying amount of
means of in accounting an existing asset or
measurement are estimates because liability or altering
available. IFRS requires it. the subsequent
accounting for
existing or future
assets or liabilities
Correction Prior Period Errors in accounting principle The correction of an
of prior the Financial that is acceptable error in the financial
period error Statements must be should be treated as statements that were
corrected an accounting error. reported for a prior
retrospectively. the current operating period; or
Amounts for the section of the income Adjustments caused
current year are statement in the year by the realization of
unaffected. the correction is the income tax
made. to correct for benefits arising from
the error. the operating losses
of purchased
subsidiaries before
they were acquired

C. Required:
Compute for Basic Earnings per Share and Diluted Earnings per Share

Net Income 5,000,000


Preference dividend (4,000,000 X 10%) (400,000)
Net Income to ordinary shares 4,600,000
Basic Earnings Per Share (4,600,000/250,000) P 18.4

Ordinary share outstanding 460,000


Potential ordinary to be shared issued 100,000
Total ordinary share 470,000

Net income 5,000,000


Preference dividend (400,000)
Net income to ordinary share 4,600,000
Diluted earnings per share (4,600,000/ 470,000) P 9.79

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