If A Contract Involves A Significant Financing Component

Ariana

23 Oct, 2019

If a contract involves a significant financing component a. If a contract involves a significant financing component a.

Solved Ca Question 4 The Transaction Price O Excludes Tim

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C the transaction amount should be based on the current sales price of goods or services.

If a contract involves a significant financing component. The time value of money is used to determine the fair value of the transaction. Fair value determined either by measuring the consideration received or by discounting the payment using an imputed interest rate. The time value of money is not required to determine transaction price if the payment is scheduled to occur in more than a year.

The transaction amount should be based on the current sales price of goods or services. When contract sales transaction involves a significant financing component. Entities determine the significance of a financing component at an individual contract level rather than at a portfolio level.

Identifying a significant financing component. The transaction amount should be based on the current sales price of goods or services. Interest accrued on consideration to be paid over time.

Significant financing component exists when consideration will be received after one year from the fulfilment of the performance obligation. Ifrs 15 revenue from contracts with customers your questions answered. The time value of money is used to determine the fair value of the transaction.

B the time value of money is not required to determine transaction price if the payment is more than a year. Contract involves the sale of a good. In making the assessment of whether a significant financing component exists asc 606 10 32 16 provides the following factors that must be considered.

If a contract involves a significant financing component a the time value of money is used to determine the fair value of the transaction. In this case the seller would have given finance to the customer in addition to fulfilment of the contract. Interest must be accrued on the current sales price of goods or services.

If all above involves significant component. For example if the terms are fob shipping point what is the appropriate treatment and how will revenue. Company reports as interest expense or interest revenue.

Significant Financing Component Revenue Recognition