Mastering Deferred Expenses

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According to IFRS 15, which of the following contracts are exempted from the standard?

Financial instruments and other contractual rights or obligations

Non-monetary exchanges between entities in the same line of business (correct)

Insurance contracts

Lease contracts

What is the meaning of 'performance obligation' in the context of IFRS 15?

The object of the contract: what is being sold and how (correct)

The elements to be identified in order to recognize a revenue

The amount one will receive in exchange for the goods or services

An agreement enforceable by law between the two parties

What does IFRS 15 provide a five-step model for?

Valuing the revenue to be recognized

Recognizing a revenue

Identifying elements to recognize a revenue (correct)

Determining the contract terms

What is the transaction price?

Euro 200,000 Signup and view all the answers

Based on the text, how is the transaction price allocated?

Based on relative stand-alone selling prices Signup and view all the answers

What is the purpose of including variable consideration in the transaction price?

To accurately reflect the amount of consideration expected Signup and view all the answers

Based on the text, how does Contractor M determine whether the bonus should be included in the transaction price?

Based on the certification specified in the contract Signup and view all the answers

Which of the following criteria must be met for an entity to account for a contract with a customer?

a) The parties have approved the contract and are committed to perform their obligations Signup and view all the answers

What does collectability refer to in the context of a contract with a customer?

a) The customer's intent and ability to pay the promised consideration Signup and view all the answers

Which of the following is NOT a performance obligation in the contract to manufacture and install customized equipment?

d) Sale of installation services separately Signup and view all the answers

How does Contractor M determine the expected value for the contract to construct a corporate headquarters?

a) By considering the possible outcomes and their respective probabilities Signup and view all the answers

Which type of cost is immediately linked to the object?

Direct cost Signup and view all the answers

What is the classification of deferred revenue in the balance sheet?

Liabilities Signup and view all the answers

What is the classification of accrued revenue in the balance sheet?

Assets Signup and view all the answers

What is the classification of deferred expenses in the balance sheet?

Assets Signup and view all the answers

What is the classification of accrued expenses in the balance sheet?

Liabilities Signup and view all the answers

Which of the following is an example of a fixed cost?

Rent cost Signup and view all the answers

What is the relationship between costs and revenues in IFRS?

Costs are regulated by IFRS 15 Signup and view all the answers

What is the impact of greater volumes on the average cost of an item?

The average cost decreases Signup and view all the answers

What type of cost depends directly on production volumes?

Variable costs Signup and view all the answers

What is the stand-alone selling price estimated by Entity A for the hardware?

Euro 185.000 Signup and view all the answers

What is the reason for the customer's professional services being more valuable if rendered as soon as possible?

The customer's business is highly seasonal Signup and view all the answers

What is control in the context of revenue recognition?

The ability to direct the use of and obtain the benefits from an asset Signup and view all the answers

Why does the customer not simultaneously receive and consume the benefits of Audit Corp.'s performance in the consulting contract example?

The nature of the professional opinion Signup and view all the answers

According to IFRS, when should costs be recognized in the accounting process?

When the control is transferred Signup and view all the answers

When does a company record deferred taxes according to IAS 12?

When it is probable that the recover of the asset or reduction of the liability will influence future payment of taxes Signup and view all the answers

When does a company account for deferred expenses?

At the beginning of the next period Signup and view all the answers

When does a company account for accrued revenues?

At the end of the year Signup and view all the answers

Which of the following best describes taxable income?

The profit or loss related to a period, determined according to fiscal laws Signup and view all the answers

What is the difference between current taxes and deferred taxes?

Current taxes represent the amount of tax owed on the current income, while deferred taxes represent taxes that will be paid in the future Signup and view all the answers

Which of the following is an example of a temporary difference?

Depreciation is different between fiscal and accounting law Signup and view all the answers

How are deferred taxes recorded?

Debit→Deferred tax liability (IS), Credit→Deferred tax liability (BS) Signup and view all the answers

A customer is defined as a party that has contracted with an entity to obtain goods or services that are an output of the entity's ordinary activities in exchange for consideration. Which of the following statements is true about customers and contracts?

A customer can also be a counterparty to the contract if they share in the risks and benefits of an activity or process. Signup and view all the answers

What is the definition of a contract according to the text?

An agreement between two or more parties that creates enforceable rights and obligations. Signup and view all the answers

When is a revenue recorded according to the text?

When a company has both a customer and a written contract agreed upon. Signup and view all the answers

What should be recorded as a liability according to the text?

Considerations (i.e. cash) received when the criteria for contracts are not met or the entity has no remaining obligation to transfer goods or services. Signup and view all the answers