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Revenue from contracts with customers (IFRS 15) part 2 – ACCA (SBR) lectures

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  1. Hi,

    In you example you stated that the transaction price is 480.
    Then, in the next step you allocated the trasaction price to each of the performance obligations (270 each) which is 540. I think that the transaction price is 540 (45×12) and not 480. The Vodafone numbers are just a reference for us to be bale to allocate the 45×12 price to each obligation. Let me know if im wrong please.

  2. Hi sir, I could not find the example 1 in this youtube videos in the lecture notes that I downloaded from opentuition Sep 2020 to Jun2021. May I ask Is there any amendment regarding the IFRS 15 since 2018?
    Thank you

  3. Hello,

    First of I would like to thank you for these free lectures and I really appreciate what Open Tuition is trying to achieve.
    Along side these notes and lectures I am studying ACCA through Kaplan and there is a question on IFRS 15 – revenue I am not completely happy with.

    The question is as follows:

    On December 1st 20X1, Company A provides a service to a customer for the next 12 months. The consideration is $12million. Company A is also entitled to an extra $3million if, after twelve months, the number of mistakes falls below a certain threshold.

    Required:

    Discuss the accounting treatment of the above for the year ended 31 December 20X1 given that it is highly probable that the number of mistakes made will fall below the acceptable threshold.

    The Answer I am given in brief is $1.25million.

    I know that the consideration of $1million will not change however there is discussion on the variable consideration of $3million.
    I can easily understand that 3/12 gives me the 250,000 and as Company A its highly probable to meet the threshold, thus 1.25million revenue should be recognized.

    My question is:

    Step 5 states that revenue is recognised when (or as) a performance obligation is satisfied, isn鈥檛 it true that the variable consideration should only be recognised AFTER/ON the 12th month as this is when the performance obligation is satisfied?

    Company A could, in theory, meet the mistakes threshold limit for 11 months thus recognising the extra 250K variable contribution per month however come December 20X2, Company A could make enough mistakes to take them over the acceptable threshold thus making them not qualify for the extra $3million.

    I argued that because Step 5, I could only recognise the variable contribution after competing the 12 months and keeping under the acceptable mistake threshold.

    However, I was wrong. I hope my question makes sense.

  6. Hello Sir,
    In part 4 ( Allocation of transaction price) , if the entity does not sell repair and maintenance service separately, will the transaction price of $10,000 be spread between two years?

  8. Hi sir,

    Regarding to the answer for Example 4 on the financial statement part, why is it $100 in non-current liabilities and $200 in current liabilities?

    Thanks.

  9. Hi,

    My question is regarding the Luckers co example.

    So we have recognized 8 638$ as revenue in the year of sale,

    So i assume the JE would be:

    Dr Receivables 8 638
    Cr Revenue 8 638

    and the remaining will be interest income added to the receivables in the next three years

    But are we not supposed to classify revenue as receivables only in case they are receivable within 1 years time? In this case we will receive it only after 3 years. Could you tell me then why we are classifying this as a receivable ?

    • the 8638 is discounted to present value and so to recognise the sale of the car which has happened because the control aspect has been transferred to the customer and so the value of the car at present moment in time would be 8638 to be recognised as revenue

  10. Hi,

    For the last example (Telephonica) : Shouldn’t the transaction price be the $540 (12 x $45) as step 4 asked you to allocate the transaction price to each performance obligation, which you have allocated $270 each, totalling $540?

    If you’re saying in step 3 that $480 is the transaction price, then why are you allocating a total of $540 to the performance obligations?

  11. Hi there, thanks for the lecture, nice and simply put. Please explain how we arrived at the 480 and why we are using figures from Telephonica and Vodafone in the same calculations. I thought they were two different companies each dealing with their customers and should have been accounted for differently.

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