Contract Modifications in Financial Reporting
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Questions and Answers

What is the nature of the promise made by the entity to the customer?

  • To provide the customer with a ticket to fly (correct)
  • To offer a discount on future flights
  • To provide the customer with a flight
  • To ensure the specified flight is available for the customer

Why is the entity considered a principal in the transaction?

  • Because it controls the ticket before transferring it to the customer (correct)
  • Due to its ability to cancel flights at any time
  • Because it sets the sales prices for tickets
  • Due to its responsibility for providing the flight itself

What does 'inventory risk' refer to in the context of the entity's operations?

  • The risk of overbooking flights
  • The risk of running out of tickets for sale
  • The risk of not being able to provide flights on time
  • The risk of losing value on unsold tickets (correct)

How does the entity determine whether it controls the ticket before transferring it to the customer?

<p>By considering specific indicators as principal or agent under the contract (B)</p> Signup and view all the answers

Why does the entity conclude that it is a principal in the transaction?

<p>Because it has discretion in setting sales prices for tickets (D)</p> Signup and view all the answers

What aspect of providing tickets makes the entity responsible for fulfilling the contract?

<p>Being primarily responsible for fulfilling the contract (B)</p> Signup and view all the answers

Why is the entity not responsible for providing the flight itself?

<p>Because airlines are responsible for flight logistics (C)</p> Signup and view all the answers

'Indian Accounting Standard 115' pertains to which area of accounting?

<p>&quot;Revenue Recognition&quot; (C)</p> Signup and view all the answers

'Company D Ltd.' is mentioned in the text to provide an example related to what?

<p>Business entities' contractual arrangements (D)</p> Signup and view all the answers

What role does 'discretion in setting sales prices' play in determining a company's position as a principal or agent?

<p>Can influence whether a company is considered a principal or agent (C)</p> Signup and view all the answers

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