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Contract Modifications in Financial Reporting

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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?

By considering specific indicators as principal or agent under the contract Signup and view all the answers

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

Because it has discretion in setting sales prices for tickets Signup and view all the answers

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

Being primarily responsible for fulfilling the contract Signup and view all the answers

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

Because airlines are responsible for flight logistics Signup and view all the answers

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

"Revenue Recognition" Signup and view all the answers

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

Business entities' contractual arrangements 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?

Can influence whether a company is considered a principal or agent Signup and view all the answers