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IFRS 15 - Revenue, if - Coggle Diagram

- - - - (a) a good or service (or a bundle of goods or services) that is distinct; or
      - (b) a series of distinct goods or services that are substantially the same and that have the same pattern of transfer to the customer.
    - - (a) một hàng hóa hoặc dịch vụ (hoặc gói hàng hóa hoặc dịch vụ) tách biệt; hoặc
      - (b) một nhóm hàng hóa hoặc dịch vụ tách biệt về cơ bản giống nhau và có cùng cách thức chuyển giao cho khách hàng
- - - - parties have approved the contract and are committed to perform their respective obligations;
      - the entity can identify each party’s rights
      - the entity can identify the payment terms
      - the contract has commercial substance
      - probable to collect the consideration. Consider only the customer’s ability and intention to pay that consideration when it is due.
  - - - entity: no remaining obligations
        
        consideration: non-refundable
      - contract: terminated
        
        consideration: non-refundable
- - - - False
    - - True
- - - - At 31 Dec 20X7: The customer bought 600 products from A Co. A Co estimated that in this year, the customer will not buy up to 1000 products. Therefore, the discount amount won’t be reached.
      - At 31 Mar 20X8: Due to unexpected demand of customers for 300 products in extra from A Co. A Co estimated that customers will reach the discount limit.
    - - => At 31.12: Revenue recognised: 550 x 600 = 330.000 (because the company believes that it wont reach the threshold of 1000)
      - However, until 31.3.N+1: The customer unexpectedly bought 300 products in extra. Therefore the company estimated that the customer would buy up to 1000 products. So, they applied the discount.
      - => Revenue for this quarter = 500 x 300 – 50 x 600 = 120.000
  - - - Dr Acc Liability (unearned revenue): $12.48m
        Cr Acc Revenue: $12.48m
        When transferring the office to the customer
- - - - best evidence
        
        observable price
        (of a good or service)
        
        If no obs price?
        
        Estimate stand-alone selling price by?
        
        Adjusted market assessment approach (đánh giá thị trường có điều chỉnh)
        (compare SASP with SASP from competitors)
        
        Expected cost plus a margin approach (chi phí cộng lợi nhuận biên)
        (add an appropriate margin to the expected costs of PO)
        
        Residual approach (giá trị còn lại)
        (total transaction price less the sum of the observable stand-alone selling prices)
    - - in proportion to SASP.
  - - - 12-month Internet service – 1 month 100 => total contract price = 12 x 100 = 1200
        
        Free phone service
    - - Service 80/month
        
        Phone: 300
    - - Separate performance obligation
        
        Phone provider
        
        Internet service provider
      - Stand-alone selling price
        
        300
        
        80 x 12 = 960
        
        Total: 1260
      - % on total value
        
        23.8%(=300/1260)
        
        76.2%(=960/1260)
        
        Total: 100%
      - Contract price
        
        285.6 (=23.8% x 1200)
        
        914.4 (=76.2% x 1200)
        
        Total: 1200
- - - - 2 abilities
        
        the ability to direct the use of, and obtain substantially all remaining benefits from, the asset.
        
        the ability to prevent other entities from directing the use of, and obtaining the benefits from, an asset.
  - - - 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 (for example, work in progress) 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 (see paragraph 36) and the entity has an enforceable right to payment for performance completed to date (see paragraph 37).
    - - The entity has a present right to payment for the asset
      - The customer has legal title to the asset
      - The entity has transferred physical possession of the asset
      - The customer has the significant risks and rewards of ownership of the asset
      - The customer has accepted the asset
  - - - Contract modifications
        
        Separate contract
        if both criteria are met
        
        the scope of the contract increases because of the addition of promised goods or services that are distinct (in accordance with paragraphs 26–30); and
        
        the price of the contract increases by an amount of consideration that reflects the entity’s stand-alone selling prices of the additional promised goods or services and any appropriate adjustments to that price to reflect the circumstances of the particular contract.
        
        Price of additions
        
        SASP
        
        Separate contract
        
        Not SASP
        
        Old contract is cancelled.
        
        Combine old and new contract.
        
        Example
        
        there should have been 2 contracts as follows:
        
        Contract A: 500 x 6 x 80 = 240.000
        
        Contract B: 100 x 6 x 65 = 39.000
        
        => Total value = 279.000
        
        1.1 – 30/6: require 500 packs/month Revenue from contract = 500 x 6 x 80 = 240.000
        
        30/6 – 31/12: require 600 packs/month (add up 100 packs/month)
        
        But bc $65 is not the stand-alone selling price so the first contract is cancelled.
        
        => Instead, it is the contract with average price (create a new contract to avoid unreasonable selling price) Total revenue = 279.000
        
        => Selling price per leather packet = 279.000/(6 months x 600 packets/month) = $77,5
        
        + => Revenue of new contract should be $77,5 x 6 x 600 = $279.000
      - Combination of contracts
        
        Example
        
        So Does Java Co need to integrate 2 contract into 1 contract in accordance with IFRS 15?
        
        => They should.
        
        In year 20X7, JavaCo signed a contract to grant customer administration software license to customer.
        
        3 days later, in another contract, Java Co agreed to provide consultancy service to significantly modify the previous licensed-for-sale software to operate in the information system of customer.
        
        Customer cannot use the software until the modification service completed.
        
        Because:
        
        2 contracts are signed on close dates and with the same customer.
        
        establish one PO, integrating licensing and servicing into 1 complete product. Software is modified significantly by the consultancy services.
    - - The value of vouchers is not allowed to be exchanged is referred to as?
        abandonment value (giá trị từ bỏ)
      - The time to recognise the voucher depends on what? Depends on expected behaviour of customers (depending on their needs) and legal limits.
      - Example:
        
        Voucher of $100, estimated that customer will exchange it for $90, abandonment value is $10.
        The chain of stores will refund for the abandonment value or not? Accounting for revenue.
        
        They won’t refund for the abandonment value bc payment obligation is done, only providing services for $90.
        
        Nominal value
        
        Obligation: $90
        
        Abandoned: $10
        
        Revenue: $100
        
        At the time of selling voucher:
        
        Dr Cash in bank: $100
        
        Cr Contract Liability: $100
        
        Proportion %
        
        Obligation: 100%
        
        Abandoned: $10/$90 = 11%
        
        Revenue: $100/$90 = 111%
        
        1st time allocation
        
        Obligation: $50 (=5/9 x $90)
        
        Abandoned: $5.6 (=5/9 x $10)
        
        Revenue: $55.6 (=5/9 x $100)
        
        At the 1st time allocation:
        
        Dr Contract Liability: $55.6
        
        Cr Revenue: $55.6
        
        2nd time allocation
        
        Obligation: $90-$50 = $40
        
        Abandoned: $4.4
        
        Revenue: $44.4
        
        At the 2nd time allocation:
        
        Dr Contract Liability: $44.4
        
        Cr Revenue: $44.4
    - - 2 cases of establishing PO of separate contract
        
        not form PO of separate contract
        
        Eg: the product having warranty paper to comply with law, bc they are sure that the product runs well and there is nothing wrong with it, for example a super tepid (ấm siêu tốc). (It is accounted for under IAS 37, rather than IFRS 15)
        
        form PO of separate contract
        
        Eg: Customer can choose to buy or not to buy that service. Stand alone selling price, form a separate PO. The entity account for this revenue separately, for example, motorbikes, 2-year warranties.
        
        => 2 separate PO are selling bikes and providing warranty services.
        
        => The entity account for these revenue separately.
    - - Example?
        
        Transaction price is allocated to 3 of them and revenue is only recognised if (or when) control right is transferred to the customers.
        
        3 POs.
        
        Storing spare parts at the warehouse (custodial services)
        
        Providing spare parts
        
        Providing machines
        
        An entity signed a contract of providing machines and spare parts. After 2 years of service, customer has right to control both of them but spare parts are required to be remained at the entity’s warehouse.
        How many PO of the entity?
      - Meaning?
        
        Invoice is cleared but goods are not yet transferred.
        
        The sellers still hold them for a couple of times.
      - the right of control is considered to be transferred when?
        
        the goods remain in the warehouse of the SELLERS.
        
        they are delivered to customers
      - When to recognise revenue from custodial services?
        
        custodial services is an PO satisfied over time.
        
        thus, revenue from custodial services will be recognised throughout the custodial period of time.