Section A

Under IFRS 15 Revenue from Contracts with Customers, what is the core principle for recognizing revenue?

Answer options:

Revenue is recognized when cash is received from the customer

Revenue is recognized when an invoice is issued to the customer

Revenue is recognized when (or as) the entity satisfies a performance obligation by transferring a promised good or service to a customer

Revenue is recognized when the risks and rewards of ownership have transferred

How to approach this question

Recall the 5-step model of IFRS 15. Step 5 is recognizing revenue when performance obligations are satisfied.

Full Answer

C.Revenue is recognized when (or as) the entity satisfies a performance obligation by transferring a promised good or service to a customer✓ Correct

The core principle of IFRS 15 is that an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled. This happens when a performance obligation is satisfied.

Common mistakes

Selecting the 'risks and rewards' option, which is the outdated IAS 18 standard.

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Practice the full ACCA FA — Financial Accounting Practice Exam 1

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