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Hi Stephen,
Below is there full answer
“owever, on 4 December 20X8, the contract is modified. As a result, the fixed consideration and expected costs increase by $110,000 and $60,000, respectively. The goods and services promised in the modification are not distinct from those promised in the original contract and there remains a single performance obligation. Therefore the modification is treated as part of the original contract. The allowable time for achieving the bonus is extended by six months with the result that Tang concludes that it is highly probable that including the bonus in the transaction price will not result in a significant reversal in the amount of cumulative revenue recognised in accordance with IFRS 15. Therefore the transaction price is $1,710,000 (1.5m + 0.11m + 0.1m).Therefore, Tang updates its estimates of costs and revenue as follows:Tang has satisfied 60.5% of its performance obligation ($0.52m actual costs incurred/$0.86m total expected costs). It recognises additional revenue of $59,550 [(60.5% × $1.71m) – $0.975m revenue recognised to date] at the date of the modification as a cumulative catch-up adjustment. As the contract amendment took place after the year end, it is a non-adjusting event and the additional revenue would not be recognised in the year ended 30 November 20X8.”
They only mention that the additional revenue will not be recorded in year ended 30 November X8. My question is that because there’s a change in the estimation of the remaining percentage of completion (from 35% to 39.5% (100 – 60.5)), will the additional revenue be included in 30 November X9?
I was thinking why would they calculate the additional revenue when it’s not to be adjusted anywhere. Let me know if I misunderstood where they said “cumulative catch-up adjustment”. Totally confused.thank you
Hi Stephen,
Below is there full answer
“owever, on 4 December 20X8, the contract is modified. As a result, the fixed consideration and expected costs increase by $110,000 and $60,000, respectively. The goods and services promised in the modification are not distinct from those promised in the original contract and there remains a single performance obligation. Therefore the modification is treated as part of the original contract. The allowable time for achieving the bonus is extended by six months with the result that Tang concludes that it is highly probable that including the bonus in the transaction price will not result in a significant reversal in the amount of cumulative revenue recognised in accordance with IFRS 15. Therefore the transaction price is $1,710,000 (1.5m + 0.11m + 0.1m).Therefore, Tang updates its estimates of costs and revenue as follows:Tang has satisfied 60.5% of its performance obligation ($0.52m actual costs incurred/$0.86m total expected costs). It recognises additional revenue of $59,550 [(60.5% × $1.71m) – $0.975m revenue recognised to date] at the date of the modification as a cumulative catch-up adjustment. As the contract amendment took place after the year end, it is a non-adjusting event and the additional revenue would not be recognised in the year ended 30 November 20X8.”
They only mention that the additional revenue will not be recorded in year ended 30 November X8. My question is that because there’s a change in the estimation of the remaining percentage of completion (from 35% to 39.5% (100 – 60.5)), will the additional revenue be included in 30 November X9?
I was thinking why would they calculate the additional revenue when it’s not to be adjusted anywhere. Let me know if I misunderstood where they said “cumulative catch-up adjustment”. Totally confused.thank you
Hi,
I have a question for this Panther Group
Why W6 Group RE carried forward, in calculating post acquisition RE earnings, there is no adjustment for interest loan cost from 1.7.X4 to 31.12.X4
I think the post acquisition profit ( CB balance deducted by OB at the acquisition) will include the loan cost and we should deduct this?
Thank you
