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Hi sir for march/june 2017 P2 Exam,
Question 3(c) Carsoon on revenue, regarding the counter claim against the customer.
The answer key states that the following:
Carsoon accounts for the claim as a contract modification in accordance with
IFRS 15. The modification does not result in any additional goods and services being provided to the customer. In addition, all of the remaining goods and services after the modification are not distinct and form part of a single performance obligationWhy is the counter claim accounted for as a contract modification? The contract already stated that penalties are payable by Carsoon if the contract is delayed and penalties payable by the customer if Carsoon cannot gain access to the construction site. They seem to be simply applying the contract, they aren’t doing anything new, so why is this a modification?
Also, what does it mean by “all the remaining goods and services after the modification are not distinct and form part of a single performance obligation” ? Could you please explain in layman terms.
I think they ‘think’ it’s a modification to their existing performance obligation as opposed to a separate performance obligation – the point being tested, I suppose, it’s that it’s not a separate performance obligation. I wouldn’t have thought that any candidates wrote anything like the model answer!
On the other hand the new storage facility is a new performance obligation.
This is old syllabus – in future please me give reference in Kaplan or BPP exam kit, and I’ll get back to you. We ask you to use exam kits rather than past papers because their answers reflect the new style of the exam.
Bear in mind that, although you may not believe it, you are much less likely to encounter obscure answers since the style of the exam changed.
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