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WorksheetsFR- IFRS 15-Revenue
Total questions: 43
Worksheet time: 34mins
OC signed a contract to provide office cleaning services for a client for a period of one year from 1 October 20X8 for a fee of $500 per month.
The contract required the client to make one payment to OC covering all 12 months’ service in advance. The contract cost to OC was estimated at $300 per month for wages, materials and administration costs.
OC received $6,000 on 1 October 20X8.
What profit or loss on the contract should OC recognise in its statement of profit or loss for the year ended 31 March 20X9?
$1,200 profit
$1,201 profit
$1,300 profit
$1,400 profit
On 31 March, DT received an order from a new customer, XX, for products with a sales value of $900,000. XX enclosed a deposit with the order of $90,000.
On 31 March, DT had not obtained credit references of XX and has not determined if it will meet this order.
According to IFRS 15 Revenue from Contracts with Customers, which TWO of the following indicate how DT should record this transaction in its financial statements for the year ended 31 March?
Include $900,000 as revenue for the year
Include $90,000 as revenue for the year
Do not include any amount as revenue for the year
Recognise a trade receivable for $810,000
Digger commenced contract X47 on 1 July 20X3. Performance obligations under the contract are to be satisfied over time and the stage of completion is regularly assessed. Details for the first year of the contract were as follows:
$000Amounts invoiced2,400Costs incurred at date of last assessment1,800Costs incurred since last assessment200Amounts received2,100Total contract price4,200Estimated costs to complete1,200Survey of performance completed2,520
The company invoices the customer immediately it receives an assessment of the amount of the work done.
Under IFRS15 what amount should Digger include as cost of sales for the X47 contract for the year ended 30 June 20X4?
$2,000,000
$3,000,000
$5,000,000
$7,000,000
During the month of March, Jolly Tar sells 10 units of a product for $200 each to SandyBeach.
SandyBeach can claim a 5% prompt payment discount if the invoice is paid within 30 days.
SandyBeach has also been subject to bankruptcy rumours in the national press. Jolly Tar estimates that there is a 20% probability that SandyBeach will not pay for the goods.
What amount of revenue will be included in Jolly Tar’s profit or loss in respect of this transaction?
$0
$1,600
$1,900
$2,000
In accordance with IFRS 15 Revenue from Contracts with Customers, when should the transaction price be adjusted for the time value of money?
Where an advance payment is required
Where the entity may ultimately accept an amount lower than that initially promised in the contract
If the contract includes a significant financing component
If the time between the transfer of goods or services and payment exceeds two years
Which of the following is NOT a step in the five-step model set out in IFRS 15 Revenue from Contracts with Customers?
Allocation of the transaction price to the separate performance obligations
Identification of the performance obligations in the contract
Recognition of revenue when the risks and rewards of ownership pass to the customer
Determination of the transaction price
Edifice Co is a construction company that builds apartments for sale.
Which of the following assets would NOT be recognised in the financial statements of Edifice Co in respect of contracts with customers?
Contract asset
Inventory
Property, Plant and Equipment
Receivable
On 1 January, Afador Co enters into a contract with Terrier Co for the sale of mining equipment for $350,000. Under the terms of the contract, Afador Co has an option to repurchase the equipment for $385,000 on or before 31 December. Terrier Co pays Afador Co $350,000 on 1 January.
What is the correct account for the credit entry in respect of the cash receipt on 1 January?
Deferred income
Financial liability
Lease liability
Revenue
Repro has prepared its draft financial statements for the year ended 30 September 20X4. It
has included the following transactions in revenue at the amounts stated below.
Which of these has been correctly included in revenue according to IFRS 15 Revenue from
Contracts with Customers?
Agency sales of $250,000 on which Repro is entitled to a commission of 10%.
Sale proceeds of $20,000 for motor vehicles which were no longer required by Repro.
Sales of $150,000 on 30 September 20X4. The amount invoiced to and received from
the customer was $180,m which includes $30,000 for ongoing servicing work to be
done by Repro over the next two years.
Sales of $200,000 on 1 October 20X3 to an established customer who (with the
agreement of Repro) will make full payment on 30 September 20X5. Repro has a cost
of capital of 10%.
Yling entered into a contract to construct an asset for a customer on I January 20X4 which is
expected to last 24 months. The agreed price for the contract is $5 million. At 30 September
20X4, the costs incurred on the contract were $1.6 million and the estimated remaining costs
to complete were $2.4 million. On 20 September 20X4, Yling received a payment from the
customer of $1.8 million which was equal to the full amount billed. Yling calculates contract
progress using the input method, on the basis of costs incurred compared to the estimated
total costs.
What amount would be reported as a contract asset in Yling's statement of financial
position as at 30 September 20X4?
(a)
CN started a three-year contract to build a new university campus on 1 April 20X4. The
contract had a fixed price of $90 million. CN will satisfy the performance obligation over time.
CN incurred costs to 31 March 20X5 of $77 million and estimated that a further $33 million
would need to be spent to complete the contract,
CN measures the progress of contracts using work completed compared to contract price. At
31 March 20X5, a surveyor valued the work completed to date at $63 million.
Select the correct amounts to be shown in revenue and cost of sales in the statement of
profit or loss for the year ended 31 March 20X5?
Locke sells machines, and also offers installation and technical support services. The
individual selling prices of each product are shown below.
Sale price of goods
Installation
One year service
$75
$30
$45
Locke sold a machine on I May 20XI, charging a reduced price of $100, including installation
and one year's service.
Locke only offers discounts when customers purchase a package of products together.
According to IFRS IS Revenue from Contracts with Customers, how much should Locke
record in revenue for the year ended 31 December 20X1? Workings should be rounded to
the nearest $.
(a)
BL entered into a contract with a customer on I November 20X4. The contract was scheduled
to run for two years and has a sales value of $40 million. BL will satisfy the performance
obligations over time.
At 31 October 20X5, the following details were obtained from BL's records:
Costs incurred to date 16
Estimated costs to completion 18
Progress at 31 October 20X5 45%
Applying IFRS 15 Revenue from Contracts with Customers, how much revenue and cost of
sales should BL recognise in its statement of profit or loss for the year ended 31 October
20X5?
Revenue -Cost of sales $40 million - $16 million
Revenue -Cost of sales $40 million - $34 million
Revenue -Cost of sales
$18 million - $16 million
Revenue - Cost of sales
$18 million - $15.3 million
Malik is a construction business, recognising progress based on work certified as a proportion
of total contract value. Malik will satisfy the performance obligation over time. The following
information relates to one of its long-term contracts as at 31 May 20X4, Malik's year-end.
Contract price
Costs incurred to date
Estimated cost to complete
Invoiced to customer
Work certified to date
200,000
135,000
15,000
120,000
180,000
In the year to 31 May 20X3 Malik had recognised revenue of $60,000 and profit of $15,000
in respect of this contract.
What profit should appear in Malik's statement of profit or loss as at 31 May 20X4 in
respect of this contract?
(a)
Which of the following items has correctly been included in Hatton's revenue for the year
to 31 December 20X1?
$2 million in relation to a fee negotiated for an advertising contract for Rees, one of
Hatton's clients. Hatton acted as an agent during the deal and is entitled to 10%
commission.
$500,000 relating to a sale of specialised equipment on 31 December 20XI. The full
sales value was $700,000 but $200,000 relates to servicing that Hatton will provide
over the next 2 years, so Hatton has not included that in revenue this year.
$800,000 relating to a sale of some surplus land owned by Hatton.
$1 million in relation to a sale to a new customer on 31 December 20X1. Control passed
to the customer on 31 December 20XI. The $1 million is payable on 31 December
20X3. Interest rates are 10%.
Sugar has entered into a long-term contract to build an asset for a customer, Hewer. Sugar
will satisfy the performance obligation over time and has measured the progress towards
satisfying the performance obligation at 45% at the year-end.
The price of the contract is $8 million. Sugar has spent $4.5 million to date, but the estimated
costs to complete are $5.5 million. To date, Hewer has paid Sugar $3 million.
What is the net liability that should be recorded in Sugar's statement of financial position?
(a)
What should Ratten include in its statement of profit or loss for the year ended
30 September 20X5 for revenue in respect of the contract?
$600,000
$1,050,000
$1,500,000
$450,000
What is the value of the contract asset to be recorded in Sawyer's statement of financial
position?
$25,000
$100,000
$375,000
$625,000
What is a financial asset?
A financial asset is a non-physical asset that derives value from a contractual claim.
A financial asset is a type of liability that incurs debt.
A financial asset is a physical object with intrinsic value.
A financial asset is a tangible item that can be sold for cash.
Can you name a type of financial asset?
real estate
stocks
commodities
bonds
What does measurement of financial instruments mean?
It is the act of trading financial instruments in the stock market.
It involves predicting future market trends.
It means determining the value of financial assets and liabilities for reporting purposes.
It refers to the process of auditing financial statements.
What is the difference between debt and equity instruments?
Debt instruments provide ownership rights, while equity instruments do not.
Equity instruments require repayment like debt instruments, but with interest.
Debt instruments are always risk-free, while equity instruments are always risky.
Debt instruments involve borrowing with repayment obligations, while equity instruments represent ownership with potential profit sharing.
Why is classification of financial assets important?
It helps in understanding risk, managing portfolios, and ensuring compliance.
It increases the value of all assets automatically.
It guarantees profits on all investments.
It eliminates the need for financial regulations.
How does IFRS 9 affect financial reporting?
IFRS 9 introduces new regulations for corporate governance.
IFRS 9 only affects tax reporting and not financial statements.
IFRS 9 eliminates the need for financial reporting altogether.
IFRS 9 affects financial reporting by changing the classification and measurement of financial instruments and introducing expected credit loss provisions.
An 8% $30 million convertible loan note was issued on 1 April 20X5 at par. Interest is payable in arrears on 31 March each year. The loan note is redeemable at par on 31 March 20X8 or convertible into equity shares at the option of the loan note holders on the basis of 30 shares for each $100 of loan. A similar instrument without the conversion option would have an interest rate of 10% per annum.
What amount will be credited to equity on 1 April 20X5 in respect of this financial instrument?
$5,976,000
$5,976,000
$5,976,000
$5,976,000
How does the Conceptual Framework define an asset?
A resource over which an entity has legal rights as a result of past events and from which economic benefits are expected to flow to the entity.
A resource owned by an entity as a result of past events and from which future economic benefits are expected to flow to the entity.
A resource controlled by an entity as a result of past events and from which future economic benefits are expected to flow to the entity.
A resource to which an entity has a future commitment as a result of past events and from which future economic benefits are expected to flow from the entity.
Which of the following would be classified as a liability?
Dexter’s business manufactures a product under licence. In 12 months’ time the licence expires and Dexter will have to pay $50,000 for it to be renewed.
Reckless purchased an investment 9 months ago for $120,000. The market for these investments has now fallen and Reckless’s investment is valued at $90,000.
Carter has estimated the tax charge on its profits for the year just ended as $165,000.
Expansion is planning to invest in new machinery and has been quoted a price of $570,000.
Which of the following would correctly describe the net realisable value of a two year old asset?
The original cost of the asset less two years’ depreciation.
The amount that could be obtained from selling the asset, less any costs of disposal.
The cost of an equivalent new asset less two years’ depreciation.
The present value of the future cash flows obtainable from continuing to use the asset.
Recognition is the process of including within the financial statements items which meet the definition of an element according to the IASB’s Conceptual Framework for Financial Reporting.
Which of the following items should be recognised as an asset in the statement of financial position of a company?
A skilled and efficient workforce which has been very expensive to train. Some of these staff are still in the employment of the company.
A highly lucrative contract signed during the year which is due to commence shortly after the year end.
A government grant relating to the purchase of an item of plant several years ago, which has a remaining life of four years.
A receivable from a customer which has been sold (factored) to a finance company.
The finance company has full recourse to the company for any losses
Comparability is identified as an enhancing qualitative characteristic in the IASB’s Conceptual Framework for Financial Reporting.
Which of the following does NOT improve comparability?
Restating the financial statements of previous years when there has been a change of accounting policy.
Prohibiting changes of accounting policy unless required by an IFRS or to give more relevant and reliable information.
Disclosing discontinued operations in financial statements.
Applying an entity’s current accounting policy to a transaction which an entity has not engaged in before.
IAS 21 sets out how entities that carry out transactions in a foreign currency should measure the results of these transactions at the year end.
Using the picklist provided, select which exchange rate should non-monetary items carried at historical cost be measured?
The Closing rate
The Average rate
The Rate at date of transaction
The Rate at beginning of the year
When a single entity makes purchases or sales in a foreign currency, it will be necessary to translate the transactions into its functional currency before the transactions can be included in its financial records. In accordance with IAS 21 The Effect of Changes in Foreign Currency Exchange Rates, which of the following foreign currency exchange rates may be used to translate the foreign currency purchases and sales?
(1) The rate which existed on the day that the purchase or sale took place
(2) The rate which existed at the beginning of the accounting period
(3) An average rate for the year, provided there have been no significant fluctuations throughout the year
(4) The rate which existed at the end of the accounting period.
(2) and (4)
(1) only
(3) only
(1) and (3)
IAS 21 The Effects of Changes in Foreign Exchange Rates defines the term ‘functional currency’. Which of the following is the correct definition of ‘functional currency’?
The currency in which the financial statements are presented
The currency of the country where the reporting entity is located
The currency that mainly influences sales prices and operating costs
The currency of the primary economic environment in which an entity operates
An entity took out a bank loan for 12 million dinars on 1 January 20X1. It repaid 3 million dinars to the bank on 30 November 20X1. The entity has a reporting date of 31 December 20X1 and a functional currency of dollars ($). Exchange rates are as follows:
Dinars: $1
1 January 20X1 6.0
30 November 20X1 5.0
31 December 20X1 5.6
What is the total loss arising (to the nearest $000) on the above transactions in the year ended 31 December 20X1?
$208,000
$207,000
$209,000
$$204,000
A manufacturing entity buys a machine (an item of property, plant and equipment) for 20 million dinars on 1 January 20X1. The machine is held under the cost model and has a useful life of 20 years. The entity has a reporting date of 31 December 20X1 and a functional currency of dollars ($). Exchange rates are as follows:
Dinars: $1
1 January 20X1 2.0
31 December 20X1 3.0
Average rate for year‐ended 31 December 20X1 2.5
What is the carrying amount of the machine as at 31 December 20X1?
$9.7 million
$9.6 million
$9.5 million
$6.3 million
Target is preparing its financial statements for the year ended 30 September 20X7. Target is
facing a number of legal claims from its customers with regards to a faulty product sold. The
total amount being claimed is $3.5 million. Target’s lawyers say that the customers have an
80% chance of being successful.
According to IAS 37 Provisions, Contingent Liabilities and Contingent Assets, what amount,
if any, should be recognised in respect of the above in Target’s statement of financial
position as at 30 September 20X7?
$3,500,000
$8,471,000
$5,470,000
$1,475,000
ABC has a year end of 31 December 20X4. On 15 December 20X4 the directors publicly
announced their decision to close an operating unit and make a number of employees
redundant. Some of the employees currently working in the unit will be transferred to other
operating units within ABC.
The estimated costs of the closure are as follows: $000
Redundancy costs 800
Lease termination costs 200
Relocation of continuing employees to new locations 400
Retraining of continuing employees 300
––––––
1,700
––––––
What is the closure provision that should be recognised?
$800,000
$1,000,000
$1,400,000
$1,700,000
On 1 October 20X3, Xplorer commenced drilling for oil in an undersea oilfield. The extraction
of oil causes damage to the seabed which has a restorative cost (ignore discounting) of
$10,000 per million barrels of oil extracted. Xplorer extracted 250 million barrels of oil in the
year ended 30 September 20X4.
Xplorer is also required to dismantle the drilling equipment at the end of its five‐year licence.
This has an estimated cost of $30 million on 30 September 20X8. Xplorer’s cost of capital is
8% per annum and $1 has a present value of 68 cents in five years’ time.
What is the total provision (extraction plus dismantling) which Xplorer would report in its
statement of financial position as at 30 September 20X4 in respect of its oil operations?
$34,900,000
$24,532,000
$22,900,000
$4,132,000
Which of the following would require a provision for a liability to be created by BW at its
reporting date of 31 October 20X5?
The government introduced new laws on data protection which come into force on
1 January 20X6. BW’s directors have agreed that this will require a large number of
staff to be retrained. At 31 October 20X5, the directors were waiting on a report they
had commissioned that would identify the actual training requirements.
At the year‐end BW is negotiating with its insurance provider about an outstanding
insurance claim. On 20 November 20X5, the provider agreed to pay $200,000.
BW makes refunds to customers for any goods returned within 30 days of sale, and
has done so for many years.
A customer is suing BW for damages alleged to have been caused by BW’s product.
BW is contesting the claim and at 31 October 20X5 the directors have been advised by
BW’s legal advisers that it is very unlikely to lose the case.
Using the requirements set out in IAS 10 Events after the Reporting Period, which of the
following would be classified as an adjusting event after the reporting period in financial
statements ended 31 March 20X4 that were approved by the directors on 31 August 20X4?
A reorganisation of the enterprise, proposed by a director on 31 January 20X4 and
agreed by the Board on 10 July 20X4.
A strike by the workforce which started on 1 May 20X4 and stopped all production for
10 weeks before being settled.
The receipt of cash from a claim on an insurance policy for damage caused by a fire in
a warehouse on 1 January 20X4. The claim was made in January 20X4 and the amount
of the claim had not been recognised at 31 March 20X4 as it was uncertain that any
money would be paid. The insurance enterprise settled with a payment of $1.5 million
on 1 June 20X4.
The enterprise had made large export sales to the USA during the year. The year‐end
receivables included $2 million for amounts outstanding that were due to be paid in
US dollars between 1 April 20X4 and 1 July 20X4. By the time these amounts were
received, the exchange rate had moved in favour of the enterprise.
Which TWO of the following events which occur after the reporting date of an entity but
before the financial statements are authorised for issue are classified as ADJUSTING events
in accordance with IAS 10 Events after the Reporting Period?
A change in tax rate announced after the reporting date, but affecting the current tax
liability
The discovery of a fraud which had occurred during the year
The determination of the sale proceeds of an item of plant sold before the year end
The destruction of a factory by fire
In a review of its provisions for the year ended 31 March 20X5, Cumla’s assistant accountant
has suggested the following accounting treatments:
(i) A provision for one third of the cost of replacing an oven lining, which requires
replacing every three years for technical reasons, and was last replaced on 1 April
20X4.
(ii) The partial reversal (as a credit to the statement of profit or loss) of the accumulated
depreciation provision on an item of plant because the estimate of its remaining useful
life has been increased by three years.
(iii) Providing $1 million for deferred tax at 25% relating to a $4 million revaluation of
property during March 20X5 even though Cumla has no intention of selling the
property in the near future.
Which of the above suggested treatments of provisions is/are permitted by IFRS
Standards?
(i) only
(i) and (ii)
(ii) and (iii)
(iii) only
Which TWO of the following statements about provisions are true?
Future operating losses cannot be provided for
Changes in provisions should be applied retrospectively, adjusting the prior year
financial statements
Provisions should be accounted for prudently, reflecting the maximum that could
possibly be paid out
Provisions should be discounted to present value if the effect of the time value of
money is material
