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Revenue - Coggle Diagram

- - - - A modification may be accounted for as
        
        a separate contract, or
        
        a modification of the original contract
  - - - identification of the separate performance obligations
        
        key factor in identifying a separate performance obligation
        
        distinctiveness of the good or service or a bundle of G&S
        
        distinct
        
        customer can benefit from the good or service on its own or together with other readily available resources, and
        
        it is separately identifiable from other elements of the contract.
        
        may not be distinct
        
        G&S which have been delivered but they cannot be used together with another G&S that have not yet been delivered
        
        should be combined with another G&S until they become a bundle of goods and services that is distinct
      - single performance obligation
        
        a series of distinct goods or services that are substantially the same with the same pattern of transfer
      - indicators for distinct g&s
        
        allows management to apply judgment to determine the separate performance obligations that best reflect the economic substance of a transaction.
  - - - should be estimated as either
        
        expected value
        
        represents the sum of probability-weighted amounts for various possible outcomes
        
        most likely amount
        
        most likely amount in a range of possible amounts
      - can be included to the extent that
        
        it is highly probable that a subsequent change in the estimated variable consideration will not result in a significant revenue reversal
        
        if it is not appropriate that all of the variable consideration should be included, then the entity should consider to include part of it that has passed the revenue reversal test
      - for example
        
        performance bonusses
        
        penalties
    - - it expects will best predict the amount of consideration
      - should be applied consistently throughout the contract
    - - difficult to determine where there are long-term arrangements with multiple performance obligations
        
        exists
        
        customer pays in instalment for items that has been delivered to him
        
        does not exist
        
        an advance payment is required for business purposes to obtain a longer-term contract
    - - impairment losses should be taken to profit or loss.
  - - - based on the relative standalone selling prices of the goods or services
      - made at the inception of the contract
      - if there are changes in the standalone selling price, the final allocated amounts are not adjusted
    - - observable price of a good or service when the entity sells that good or service separately
        
        If that is not available
        
        an estimate is made by using an approach that maximises the use of observable inputs
        
        for example,
        
        expected cost plus an appropriate margin or the assessment of market prices for similar goods or services adjusted for entity-specific costs and margins
        
        residual approach in limited circumstances
        
        different from the residual method that is used currently by some entities, such as software companies.
  - - - when control is passed to the customer
        
        def of control
        
        the ability to prevent others from directing the use of and obtaining the benefits from the asset
        
        can happen either
        
        at a point in time
        
        factors to determine, either
        
        present right to payment for the asset
        
        the customer has legal title to the asset
        
        the entity has transferred physical possession of the asset.
        
        over time
        
        meet one only is enough
        
        The customer simultaneously receives and consumes the benefits provided by the entity’s performance as the entity performs
        
        The entity’s performance creates or enhances an asset that the customer controls as the asset is created or enhanced
        
        The entity’s performance does not create an asset with an alternative use to the entity and the entity has an enforceable right to payment for performance completed to date.
- - - - as there would be an overstatement of revenue and costs.
- - - - when to derecognise the asset, and
      - to determine the gain or loss on derecognition