IFRS 15 PRACTICE QUESTIONS Question 1 Define the following terms in accordance with IFRS 15: Revenue from contracts with customers: Contract Contract asset Contract liability Customer Income Performance obligation Revenue Stand-alone selling price Transaction price [Total: 25 Marks] Question 2 a. What is the core principle of IFRS 15? (4) b. Name and briefly describe the five-step revenue model in IFRS 15. (10) c. Convenience Tech Shopping Ltd is a Namibia incorporated company specializing in providing online shopping via the internet. The companys standard practice is to package a customers order for a price of N$175. The companys system operates as follows: i. Customers phone through their orders to the company representatives; ii. Company advises customer services offered and the cost thereof. For future reference purposes, all telephonic conversions are recorded; iii. If the customer is agreeable to the terms provided by company representatives, a payment is made over the telephone via the customers credit card. iv. On successful processing of the payment made by the customer, Convenience Tech Shopping Ltd gives the customer an access code for the companys website in order to track its order. Required Discuss whether the online shopping service provided by Convenience Tech Shopping Ltd is a contract with a customer in accordance with IFRS 15. (11) [Total: 25 Marks] Question 3 d. Name and briefly describe the five-step revenue model in IFRS 15. (10) e. Consider the following independent situation. i. Settlement discount granted to creditworthy customers with a record of paying within terms. (4) ii. Revenue consisting of gross sales of goods (including VAT) (3) iii. Royalties amounting to N$45 000 are receivable from a publishing company on a commercial book licence granted by the copyright holder. In terms of the agreement, the amount is based on a certain percentage of book sales. (1) iv. Sales of products in the amount of N$210 000 to various customers, subject to a 60-day money-back guarantee if the customer is not satisfied with the product. It is expected that 5% of the product sold will be refunded. (2) v. Sales of goods by a wholesaler to a distributor for sale to end customers of the wholesaler. (2) vi. Three delivery vehicles sold to a customer and for which the customer already paid. Registration and licencing of the vehicles in the customers name have been completed. Because of limited space, the customer requested that the vehicles be kept at the dealers premises until the customer is ready to collect them. (3) Required Briefly state, with reasons, how each of the above independent scenarios would be accounted for in terms of IFRS 15-Revenue from contracts with customers. [Total: 25 Marks] Question 4 A. Trading Enterprises Ltds revenue amounts for the year ending 31 December 20x1comprises the following: NOTE N$ Invoice value of sales (including VAT at 14%) 798 000 Instalments received on lay-by sales 1 80 000 Consignment sales of all inventory on consignment 2 40 000 Cash on delivery (COD) (including VAT) 3 57 000 Trade discount received 30 000 Sales on approval at invoice value, including VAT (excluded from above sales invoice value) 4 45 600 1 050 600 Notes 1. Past experience has shown that practically all lay-by sales are completed. N$10 000 of the amount represents initial small deposits made by customers who have not made any further payments. The balance represents amounts paid by customers who have made significant deposits during the year. Total lay by sales for the year were on N$100 000 (excluding VAT). None of the goods have been taken by customers yet; Trading Enterprises Ltd is not allowed to sell them to any other customer before the lay by period has lapsed. 2. The inventory on consignment at cost account shows a balance of N$5 000. All consignment sales are made by agents and the sales take place at a gross profit of 20% on selling price. The N$40 000 excludes VAT. 3. The balance on the receivable account for COD sales at the end of the year was N$11 400. The balance at the beginning of the year of the year was N$9 120. The customers are creditworthy. 4. Sales subject to approval are accounted for separately. Invoices with a VATinclusive value of N$20 727 relate to goods accepted by the customer. A further amount of N$13 473 (VAT inclusive) is presumed to be accepted as the time period for rejection has elapsed. All of these customers are considered to be creditworthy. However, based on past experience and the nature of the goods sold, Trading Enterprises Ltd cannot objectively say that the remainder of the goods will necessarily be accepted by the customers. Required Calculate the amount of revenue to be recognized for the year ended 31 December 20x1.