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Project Revenue under IFRS 15

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA SBR Exams › Project Revenue under IFRS 15

  • This topic has 1 reply, 2 voices, and was last updated 2 years ago by Stephen Widberg.
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  • April 29, 2023 at 5:34 pm #683725
    Nikko
    Participant
    • Topics: 7
    • Replies: 22
    • ☆

    Entity T is a state owned entity. The Government has entered into an agreement with a foreign donor to carry out a project. They have decided that once the donor provides the funds to the Government, Entity T will be carrying out the performance obligations set out in the contract on behalf of the Government.

    The project is for 2 years, with 10 separate performance obligations. For 2 of the obligations Entity T has to setup a Call Center on land provided by the Government, the agreement is setup in a way where the Government starts using the premises even if not fully completed. (Leading me to think these 2 could fall under over time?)

    The rest of the obligations are made in a way where the Government can only obtain the benefits after Entity T completes the project and hands it over.

    Entity T has currently calculated the potential revenue to be recognized based on two methods;
    a) Input method (Cost)
    b) Progress method (Based on percent of project completed)

    So my question is, under IFRS 15 how should the revenue be recognized?

    April 30, 2023 at 8:23 am #683748
    Stephen Widberg
    Keymaster
    • Topics: 16
    • Replies: 3399
    • ☆☆☆☆☆

    In the exam, set out the relevant rules and then apply them.

    RELEVANT RULE= recognise revenue at a point in time or recognise rule over time

    If over time, can use – input or output (latter is stage of completion)

    APPLICATION – (I think) over time – either a or b above is OK

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