ABFA3064 FINANCIAL ACCOUNTING IV
TUTORIAL 8: IFRS 15- Revenue from Contracts with Customers.
Question 1:
IFRS 15 Revenue from Contracts with Customers was issued in 2014 and replaces the previous
international financial reporting standard relating to revenue.
Required:
Identify the five steps which need to be followed by entities when recognising revenue from contracts
with a customer.
Question 2: 5 step model on service contract
Derma Care is a beauty salon that offers a 12-session facial service contract with its customers. If the
customer signs up for the facial service contract, in return, he / she will receive a free face massager from
Derma Care.
Jenny signed up for a facial with Derma Care, and she received a free face massager from Derma Care
immediately. She had paid RM2,400 for the total contract price on 1 January 2023. Jenny has claimed one
facial session from the facial service contract on 31 January 2023.
Without contract, the face massager is sold for RM300 and the facial service is sold for RM 250 per
session.
Required:
(a) Explain how Derma Care should account for this contract?
(b) Journalise the above transaction.
Question 3 Determining the transaction price
Datacom is a network service company, which gives its customers a free handset when they sign up for a
two-year contract for the provision of network services. The contract price is RM4,800 which customers
are required to pay RM200 per month for 24 months.
The stand-alone price for the same model of handset is RM1,500 and the network service is RM150 per
month.
Required:
(a) Calculate the allocation of the transaction price between the handset and the network services contract.
(b)Determine revenue recognized in Year 1 and Year 2.
1
': step' , : 5 dentify the contiact with the castomer
Q
Step 2 : 5 dentity the separate pertormance obligations
step 3 : Determinete transaction price
step 4: Allocation the tiansaction
price to the pertormance obligation
Stepb Recognise rerenuewhena performanceobligatio 1n
:
is satitied
Q2 :
1 step ' s :Dermacarends rritten a contractwithsenny
.
Step 2 : performance obligation ( Po ) that berma care promise
togive in
the contract are 12session tacial serrice and free
genny
face massager ,
step 3 fransactionpriceisRM
:
2 ,40
Step 4 : pertormance stand dlone selling Allocatedtransaction Revenue ( RM)
Obligation price ( RM ) priceCRM )
IGOX 12 session (3 00013 300 ] × ( 2 , 181 82 / 12 )
.
12 session - , ,
2 , 4 OO ]
181 82 per
;
facial service ; ,00
.
3
;
20181 82 .
moth
fiee face
( 2 400 2 , 181 82)
,
,
.
218 18
3O
.
massager
;
218 18 .
9otal 33 O 204 OO 4O
Allocated RM 218 18 t0 free face massager and RM 2, 181 82 tothe .
ne1 Work serrices .
steps : At the point of time : this
to the free tace massager
applies
tianster at the time of contract stait ,
over time : this wouldapplyto the 12 -
session facial serrice .
IPO in theconttact :
'
face : allocated priceRM 218 .
18 x +
massager
sournal eitries ;
b
At the start of the contract when thefreeface massager istiansfer :
D5)
RM CrIRM)
( 为什么放进这
11 san Bank 2 ,4 O >
写, 为 isign
Revenue 218 18
.
Contiact 我们
COnKiact Liability 就会 旅
At the end of each month when Deima care issues monthly fiee face massager
invoice tor the 12 session facial service tor RM 20 O :
.
然低 , 他们也必
Receirable 200 ( 21818112month) 需给我钱 我会 ,
18 18 permonth 记录我 RD
5 但 ,
,
contiact asset
.
为我们巡没
Rerenue 181 82 .
issueinvoile 所以
,
这罪
为放化
12 session 是化
3: 腦來后 我们
1
tandaloneiselling
ice
pertormance Allocated )venue ( RM)
transaction
piice Rm
,
州
al obligation 1 Rm) ( 才思给他这
( 1,GCO / G , 1 OO Serrice , 才会给
Handsed 10 GO 1 , 411 . 6
X 4 ,800 ;
1 , 411 f 6 invaice
( consideratio 1n )
.
Network
serrice us 放进 R 了
的 , IO 408 O 1 G5294
,
bI
year '" : Datacom
would recognisedthe revenuein year11 is handset ,
RM 1 , 411 f 6
. that delivered atthe time ofcontiact sfart and
network service inthe year ' I, s RM 1 694. 16 ( 141 18 X 12 moths )
1 , .
.
Thuss total 5erenue need t0 be recognised is RM 3 , 105 , 92
year 2 : Datacom would
recognised the network service for year 2
RM 1 , 694 16 .
.
肉
肉
自
米
入
入
马
Fg !
XA . Asan contiact Asset 1411 f 6
Revenue 1411 f 6 .
31 Dec Bank 2 ,4 O
contiact Asset O5 , 88 ( 1411 . " 6 × 12124 f0 r " y )
,
Rerenue 1 ,
694 .
16
Y2 : 31 Dec Bank 204 O
conttact Asset 9 O 5 88 .
Revenue 1 , 694 16 .
{g :
D C
Y' Y 5 Jan
:
Bank 4 ,8 O
Revenue 1411 66 .
contract
Liability 338824
31 Dec conttact Liability 1 , 6911 .
16
Rerenue 1 694 16
,
.
Y2 : 3IDeC COntidct lidbility 1069 H 1
Revenue 10694 16 .
ABFA3064 FINANCIAL ACCOUNTING IV
contract
Question 4 price )
Orion Manufacturing Co. (Orion) prepares its financial statements annually on 31 December. During the A
year ended 31 July 2024, Orion sold 150 identical units to a distributor at a price of RM1,800 per unit.
Each unit costs Orion RM1,300 to produce. The sales agreement includes a clause that allows the
distributor to return any unsold units within a four-month trial period for a full refund. After this period,
any remaining inventory with the distributor is considered sold, and payment becomes due immediately.
From historical data with this distributor, Orion anticipates that around 5% of the units might be returned
during the permitted period.
Required:
Explain how Orion should recognize revenue from this transaction in its financial statements for the year
ended 31 December 2024, focusing on the considerations involved due to the potential returns.
Question 5 Contract completed over time
Jaya Sdn. Bhd. (Jaya) entered into a contract to build a factory building for a customer commencing on 1
January 2022, with an estimated completion date of 31 December 2023.
Control of the asset is passed to the customer as the construction takes place, and Jaya does not have an
alternative use for the asset.
Satisfaction of performance obligation is measured by reference to work completed to date.
In the first year, to 31 December 2022:
[Link] of work completed have been issued to the value of RM1,500,000.
[Link] final contract price is RM3,000,000.
[Link] invoiced to the customer as at 31 December 2022 is RM1,250,000.
[Link] payments had been received in respect of the receivable at year end.
Required:
What is the amount of revenue recognised in the financial statements of Jaya at 31 December 2022, and
what entries would be made for the contract on the statement of financial position at 31 December 2022?
2
14 : Onion would recognise the revenue based ,on the normal selling price
and the distributor already get the goods so actually will be recognisedas
rerenue ,
but
thecoptiacttherehave mention the cistributor can return the
in
unsold Unitsin d 4 monthtrial period for afullrefund ,andonion antipates
that around 5 % of the uhit might beretur1 n
Thus o
the revenue recognised :
Totalrevenue, 1
operunit
sounitsX 1 , RM
80
; RMIEO , OO
Estimated Operunitreturnsunits
; 5 SUnit XRM 1 , 80
refundOf ibOunitsX 5 %
;RM 135 OO
unsoldgoods ;
bunits
Total revenue recognised , RMI 50, OOO , RM 13 ,GO
;
RMIGG , GO
,
cost 06 goods sold :
Total CO . . ,
G S I
5 OUnit X RM 1 , 300 per unit
,
RM 19G , OO
istimated 5SUNItX RM 1 , 30 Operunit
;
returnCOGs ;RM 9,A 5
of unsoldgoods
TOtalCOGS: RMI 95OOO , RM , AG 9
;RM 185 ,IG
Returninwards , RMIBGO
,
inveptories ;
RM 9 , AG
return
,IS
Thus , Onionshouldrecognisedrevenue RM2 S 6 ,5 OOGnd COGSRMI
85
for the yf 31 Dec 2024 and also retuin inwards RM 13 , 500 and inrentorics
expected will teturn RM , GO 9 ,
15 : Revenue recognised : 19 , 00 , 00
Payiment received : 1 , 250 , 000
R IGOOO
sournal entries :
Dr ( RM) Cr ( RM )
13 Rerenue recognised :
Contract asset 1 , GOO , OO
1 , 300 , OO
Revenue
in Bill to the customer :
rade receivable 102 GO , OO
contract asset 1 , 2 GO , OO
liips The remaining RM 25O, 000 haven 't bill to customers :
contract asset RMIGO , OO
Revenue RMIGO , OO
year 2 : wokcomplete , and bill
to customer 1 .
fsmillion
DT Trade Receivabbe 1
. f5 milliOn
G contiact asset O 25 million
.
Rerenue 1 5 million
.
16 ,
customer just give you 2 milliOn
Dr Bank 2 million
cr pade ieceirable 2 million
