- November 1, 2022 at 5:37 pm #670482jingdongParticipant
- Topics: 83
- Replies: 103
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
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 thanksNovember 2, 2022 at 9:54 am #670521Stephen WidbergKeymaster
- Topics: 15
- Replies: 3152
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
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