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IFRS 15

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FR Exams › IFRS 15

  • This topic has 11 replies, 2 voices, and was last updated 8 years ago by MikeLittle.
Viewing 12 posts - 1 through 12 (of 12 total)
  • Author
    Posts
  • December 27, 2016 at 9:37 am #364523
    hemraj123
    Member
    • Topics: 110
    • Replies: 188
    • ☆☆☆

    Dear sir,

    Under contract costs, they mention that the costs have to be capitalised if certain criteria are met. As far as I understand, the capitalised cost of contract are shown as receivables, payables, contract asset and contract liability.

    1) Wouldnt the capitalised amount be the amount receivable from the contract (including the profit) – the contract price?

    2) They mention that the capitalised cost would be amortised over the period. Are receivables amortised? Won’t they have only provisions?

    Thanks

    December 27, 2016 at 1:15 pm #364528
    MikeLittle
    Keymaster
    • Topics: 27
    • Replies: 23327
    • ☆☆☆☆☆

    1) No, we only capitalise a proportion of the contract value – dependent upon the terms of the contract, the stage reached and, crucially, IFRS 15

    2) Who is ‘they’ as in “2) They mention that the capitalised cost would be amortised over the period.”

    December 27, 2016 at 1:28 pm #364532
    hemraj123
    Member
    • Topics: 110
    • Replies: 188
    • ☆☆☆

    What I meant by ‘they’ was the standard. This line is mentioned in the notes, textbook and the notes (PG-137)

    And, I was struggling to understand what exactly is the cost of obtaining the contract really is and why would it need to be capitalised?

    December 27, 2016 at 3:22 pm #364535
    MikeLittle
    Keymaster
    • Topics: 27
    • Replies: 23327
    • ☆☆☆☆☆

    A lot of work has to go into preparing submissions and tenders to obtain work

    Even in the world of accountancy there is a tremendous amount of preparatory work involved in creating a presentation to submit as a tender document when trying to win a new client

    These are the costs to be capitalised and amortised

    Is that better?

    December 27, 2016 at 3:34 pm #364537
    hemraj123
    Member
    • Topics: 110
    • Replies: 188
    • ☆☆☆

    Yes sir. One more thing. Would the rules apply to fulfilling the contract as well?

    December 27, 2016 at 3:57 pm #364539
    MikeLittle
    Keymaster
    • Topics: 27
    • Replies: 23327
    • ☆☆☆☆☆

    The recognition of revenue and related costs throughout the period of the contract makes your question non-applicable

    As the contract progresses the total contract revenue and the total contract costs are spread over the life of that contract so … I’m not really sure that I could begin to “apply the same rules to the fulfillment of the contract”

    OK?

    December 27, 2016 at 4:54 pm #364542
    hemraj123
    Member
    • Topics: 110
    • Replies: 188
    • ☆☆☆

    Oh Ok. Thank you sir 🙂

    December 28, 2016 at 5:27 am #364571
    MikeLittle
    Keymaster
    • Topics: 27
    • Replies: 23327
    • ☆☆☆☆☆

    You’re welcome

    December 28, 2016 at 5:55 pm #364599
    hemraj123
    Member
    • Topics: 110
    • Replies: 188
    • ☆☆☆

    Dear sir,

    Will IFRS 15 lecture be uploaded before the march exam?

    Thanks

    December 29, 2016 at 7:42 am #364609
    MikeLittle
    Keymaster
    • Topics: 27
    • Replies: 23327
    • ☆☆☆☆☆

    Most unlikely – but the course notes are pretty good so you shouldn’t be overwhelmed by the topic

    December 29, 2016 at 8:39 am #364615
    hemraj123
    Member
    • Topics: 110
    • Replies: 188
    • ☆☆☆

    OK sir 🙂

    December 29, 2016 at 12:54 pm #364628
    MikeLittle
    Keymaster
    • Topics: 27
    • Replies: 23327
    • ☆☆☆☆☆

    Good!

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