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Hi Dear Mike,
I hope you,ll be fine.
I need help in this question.
“XYZ Company constructs & install machines for customers. Payment is made in 3 instalments. 50% is due when order is confirmed (stage 1), 25% on delivery (stage 2) and 25% on successful installation (stage 3). Generally it takes 6 months from order being finalised until the final installation”
What is the Audit risk in this question and How should XYZ recognise Revenue?
Please Help.
Many Thanks
“How should XYZ recognise Revenue?”
“50% when order is confirmed (stage 1), 25% on delivery (stage 2) and 25% on successful installation (stage 3)”
Is there a problem with that?
I suppose that it would be possible to argue that no performance obligation exists simply because the order is confirmed. Personally I think that the confirmation of the order imposes an obligation on both parties – the one to deliver and the other to pay
Audit risk is the possibility of failing to comply with IFRS 15 or, equally, to try to comply with IFRS 15 but get it wrong.
And this could well be material!
Do you need more?
I seem to recognise the scenario – where’s the question from?
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