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Can you explain what is the treatment for the the contract with put option for the below example:-
1/1/2016 Price – $1Million There is a put option where the seller has to purchase the same before 31/12/2016 if the purchaser wishes with repurchase prices of $900,000. The market value expected is $750,000.
The question is how this transaction will record.
As per my understanding , As the repurchase prices is below the selling price Even it is above the Market price), the transaction .is to be recorded as Sale. But in some text I have seen some other treatment.
Kindly Explain
Yes. I have seen in the BPP text book for F7. The above example is also from the same text.
Are you suggesting IFRS 15 is not a part of F7 ?“Are you suggesting IFRS 15 is not a part of F7 ?” – not at all. Not only is it within the F7 syllabus. It’s a relatively new area and should be known
What I am saying is that the effect of a put option on a contract’s revenue is way out on the fringes of ACCA’s expectations of what you should know
Here’s the extract from the official syllabus concerning revenue recognition
“10. Revenue
a) Explain and apply the principles of recognition of revenue:
(i) Identification of contracts
(ii) Identification of performance obligations
(iii) Determination of transaction price
(iv) Allocation of the price to performance obligations
(v) Recognition of revenue when/as performance obligations are
satisfied.b) Explain and apply the criteria for recognising revenue generated from contracts where performance obligations are satisfied over time or at a point in time
c) Describe the acceptable methods for measuring progress towards complete satisfaction of a performance obligation
d) Explain and apply the criteria for the recognition of contract costs
e) Apply the principles of recognition of revenue, and specifically account for the following types of transaction
i) principal versus agent
ii) repurchase agreements
iii) bill and hold arrangements
iv) consignmentsf) Prepare financial statement extracts for contracts where performance obligations are satisfied over time”
I don’t see any put options in there!
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