IFRS 15 distinguishes between contract assets and IFRS 9 Financial Instruments receivables. Which one of the following statements is NOT correct? Select all that apply.
A contract asset and a receivable are both subject to the risk that the customer will cause a loss for the entity by failing to pay, but a receivable is also subject to the risk of non-performance.
A contract asset and an IFRS 9 Financial Instruments receivable are both subject to the risk of non-performance, but an IFRS 9 Financial Instruments receivable is also subject to the credit risk.
It is important to distinguish between a contract asset and a receivable because it provides financial statement users with relevant information about the risks associated with the entity’s rights.
A contract asset arises if nothing other than the passage of time is required before payment of the customer’s consideration is due. Contract assets must be presented separately from receivables.
The statement that is NOT correct is:
A contract asset arises if nothing other than the passage of time is required before payment of the customer’s consideration is due. Contract assets must be presented separately from receivables.
This statement is incorrect according to IFRS 15. Under IFRS 15, a contract asset represents a right to consideration that is conditional on factors other than the passage of time, while a receivable typically represents an unconditional right to payment that is solely dependent on the passage of time. However, it's important to note that both contract assets and receivables may be subject to the risk of non-performance by the customer, and receivables are also subject to credit risk. The distinction between contract assets and receivables is crucial for financial statement users to understand the specific risks associated with an entity's rights.
