IFRS 15 REVENUE FROM CONTRACT WITH CUSTOMERS - PRACTICE QUESTION

Why, in working W2, are you considering the (loss) recognised only in the second year? Workings W2 and W3 are cumulative workings - as it clearly explains in the video lecture on this topic Have you watched the video?

Yes Mike, i see it called " profit TO DATE" means accumulated figure, but i don't understand ur last 4 sentences Amount invoiced 13 Amount received (5) Due from customer 8 " Torrid PLC INVOICED the customer $5m and this was received in 02/15" Can u explain for me clearly about this sentence???

1st invoice Dr amount due from customer 5 Cr ????? When received the money Dr bank 5 Cr amount due from customer 5 And as at 31/12/15 we have calculated amount due to customer of 1.35 2nd invoice Dr amount due from customer 8 Cr ????? And it was paid in 03/16 that means at 31/12/15 we still have the balance on "amount due from customer" which is 8 And it was offset with balance on "amount due to customer" of 1.35 then we have 6.65??? Correct??? Can u tell me what is the corresponding account (the "????") when we account for each invoice???

Ok i understand!!!! It goes like this Y/e 2014 1/Cost incurred Dr amt due from/to customer 5 Cr bank 5 2/Revenue/ cost & profit Dr contract cost 5.4 Dr amt due from/to customer 1.8 Cr contract revenue 7.2 3/progress payment Dr bank 5 Cr amt due from/to customer 5 3 of them is combined then we have balance on debit side of 2.8 as known as amt due from customer Y/e2015 with debit side b/d of 2.8 1/Cost incurred Dr amt due from/to customer 4 Cr bank 4 2/Revenue/ cost & profit Dr contract cost 6.15 Cr amt due from/to customer 1.5 Cr contract revenue 6 not yet received the money until 03/16 Therefore it gives us c/f of 6.65 aka amt due from customer Thank u Mike!!!

The answer to: "Dr amount due from customer 8 Cr ?????" is "Credit Contract Account 8" The "Amounts due to / from Customers" should not be netted off against each other. If it's an amount due to a customer that should be shown in liabilities

Dear Mike, Can u figure out for me question 3 and also 4??? I'm stucking on it Thank you

If it helps, both question 3 and question 4 are scheduled to be amended Question 3 is a poor question and has a wrong answer shown The correct answer is 2,220 Question 4 needs to have the year changed to 31 October, 2014 Does that make it better?

Yep, thank u Mike I want to ask u about inter-company sales If P sells goods to S all all goods are still held in stock Did the inter-company sales affect on profit of S? As my thinking is: When P sells to S, the sales is recognised into revenue of P (overstated) and the unrealised profit will increase RE of P too (overstated) Therefore we need to eliminate these effects Otherwise, its grown in Inventory & COS of S which means when the sales had been took place, S accounted by increasing COS -> profit would be reduced Then when we do consolidation, we eliminate it by Cr COS It results in increase profit of S

Two entries to make, and I prefer to treat them as independent - two separate thought processes Clearly an entity cannot sell to itself and the process of consolidation is to treat the aggregation of all entities within the group as a single entity Therefore, eliminate all intra-group trading on a dollar for dollar basis. If I sell $3,264 worth of goods to you, how much did you buy from me? $3,264! So reduce COMBINED revenue, reduce COMBINED cost of sales by the aggregate of ALL intra-group trading - this adjustment is tidying up the consolidation. It ISN'T an entry that affects either entity, so NO ADJUSTMENT is made to the individual entity figures Having eliminated the intra-group sales and purchases, now turn your attention to the problem of unrealised profits. Is there in either entity inventory any goods bought from within the group? If so, there's likely to be a profit element within that inventory valuation. Calculate the unrealised profit (either mark-up or margin), determine which entity made the sale and therefore it is that same entity that has recognised the profit, and ADD that unrealised profit to that entity's cost of sales. This is NOT a tidying up exercise and the adjustment DOES affect the selling entity's retained earnings To complete the double entry, DEDUCT the unrealised profit from the COMBINED inventory These two steps need to be done by you as automatic exercises - these are bread-and-butter marks (probably 2 and maybe 3 marks) and can be earned in less than 1 minute of your time in the exam room OK?

Understood Mike !!!! The double entry to eliminate sales and cos is within a group entity, because it cannot sell to itself But the unrealised profit is still recognised by the seller and it was stored in inventory of the group, then eliminate RE of seller and invetory of group Thank u very much

That's correct, and you're welcome

Hello everyone here, I have question about the warranty contract. I company makes a contracrt to sell an item and gives a five year warranty to the item, but it is not possible to identify the warranty cost alone, in this situation what standart we should use? Thank you in advance!

Hi, The sale of the warranty uses IFRS 15. We would then use IAS 37 to work out the expected cost of the warranty provision as the sale of the item with the warranty creates a provision via the obligation to fix the product over the next five years. Thanks,