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First transition to IFRS

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA SBR Exams › First transition to IFRS

  • This topic has 1 reply, 2 voices, and was last updated 2 years ago by Stephen Widberg.
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  • Author
    Posts
  • November 1, 2022 at 5:37 pm #670482
    jingdong
    Participant
    • Topics: 89
    • Replies: 115
    • ☆☆☆

    Dear Tutor,

    In the Karplan text book chapter 16 Test your understanding 1-Nat
    Their first financial statements produced in
    accordance with I FRS Standards are for the year ended December
    20X5 and these will include comparative information for the previous
    financial year. Its previous GAAP financial statements are for the years
    ended 31 December 20X3 and 20X4. The directors are unsure about
    the following issues:
    (i) Nat received $5 million in advance orders for a new product on
    31 December 20X3. These products were not dispatched until
    20X4. In line with its previous GAAP, this $5m was recognised as
    revenue.
    The answer: The sale does not meet the revenue recognition criteria per IFRS 15
    Revenue from Contracts with Customers because control of the asset
    has not transferred from the seller to the customer. In the opening IFRS
    statement of financial position as at 1 January 20X4, a contract liability
    should be recognised. The $5 million loss on recognition of this liability
    will be accounted for in retained earnings.
    I don’t understand why loss $5million will be accounted for in RE. how do it in double entry? previous correction: Dr:Sales $5million Cr: Liability $5 million. now how to do this loss $5 million? many thanks

    November 2, 2022 at 9:54 am #670521
    Stephen Widberg
    Keymaster
    • Topics: 16
    • Replies: 3411
    • ☆☆☆☆☆

    Works like a PPA.

    In FS comparatives reduce revenue by 5m, and increase liability by 5.

    In comparative SOCIE reduce RE by 5m.

    Remember not to write journals in the exam unless they are specifically asked for – the Kaplan explanation looks good

  • Author
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