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04-Delta

The document outlines the principles of revenue recognition under IFRS 15, focusing on performance obligations related to the transfer of goods or services. It explains how revenue is recognized either at a point in time or over a period, depending on when control is transferred to the customer, and discusses the treatment of fixed and variable pricing. Additionally, it provides an example involving Delta's revenue recognition process concerning a product return and the associated financial implications.

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3 views

04-Delta

The document outlines the principles of revenue recognition under IFRS 15, focusing on performance obligations related to the transfer of goods or services. It explains how revenue is recognized either at a point in time or over a period, depending on when control is transferred to the customer, and discusses the treatment of fixed and variable pricing. Additionally, it provides an example involving Delta's revenue recognition process concerning a product return and the associated financial implications.

Uploaded by

mdahy78
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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4 Delta

Key words

1. Type of the performance obligation. Distinct promise to transfer goods


or service
2. Particular performance obligations is satisfied
3. at point of time, control transferred
4. Over period of time proportion
5. Measurement based on the price transaction and consideration an
entity expect to be entitled in exchange for
6. Fixed price transaction is invoices amount less any taxes collected in
behalf of third party
7. When the due date of the invoice date is significantly different more
the 12 months, the consideration will split into sale of goods and
finance components.
8. Where the consideration due from the customer contains variable
elements, the transaction will be based on best estimation.
1. IFRS 15 states that the revenue recognition depends on the type of
obligation under the contract with the customer, the performance
obligation is a distinct promise to transfer goods or services to satisfy
the customer expectations as mentioned in the contract.
2. The performance obligation is satisfied where the control of goods or
service transferred to the customer, according to that the entity is
entitled to revenue recognition.
3. In many cases the performance obligation is satisfied at point of
time ,e.g in most sales transactions, in those cases the revenue is
recognized where the control is transferred to the customer.
4. In other cases, the performance obligation is span over several
accounting periods to satisfy and transfer the control to the customer
e.g. the contract to construct an assets, in this case proportion of total
revenue is recognized based on the proportion of performance
obligation is satisfied and control transferred to the customer.
5. Revenue measurement based on the price , the price is the
consideration amount the entity is expected and entitled to collect
from the customer when transfer the control of goods or service as in
the sales contract and the performance obligation is satisfied.
6. In many cases the sales contract includes many performance
obligation of goods or service as one bundle together with over all one
price e.g. sale a machine with service maintenance and warranty as on
package and the total price usually with appropriate discount, in the
case the price should be allocated between the product and service
based on the original standalone price of each obligation
1.
6. In many cases, a sales contract includes multiple performance
obligations for goods or services bundled together at an overall price.
For example, selling a machine with maintenance services and a
warranty as one package, often at a discounted total price. In such
cases, the price should be allocated between the product and the
services based on their original standalone prices.
7. In most sales transaction the price is fixed, so the revenue is
recognized once the control transferred to the customer.
8. If there is a significant different between the invoice day and expected
due date of collection more than 12 months, the entity should consider
on account the time value of money and price will split into finance
component and goods or service component .
9. In some cases the price is not fixed is variable depends on the especial
terms of condition according to the contract with customer, in this case
the revenue will be recognized on the best estimation of the total
amount expect to receive from the customer.

Exhibit 1
 On 1 April 20X7 delate cannot recognize the revenue as the
customer has the right to return the product and Delta cannot
estimate the revenue.
 Delta can remove the product from stock and charge to assets
account as recoverable inventory by $80,000.
 Where the right of return the product is expired on 30 June
20X7,Delat can recognize the revenue $100,000 present value of
121,000 , the present value and charge the cost of sales $80,000
and derecognize the recoverable assets or inventory.
 Delate will also recognize fiancé income 100,000*3/12*10%=
25,00
 Delate will recognize accounts receivable by 102,500.

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