The IFRS 15 five-step model is to identify the contract, identify the performance obligations, determine the transaction price, allocate the transaction price and recognize revenue. Looking at step 5, which addresses the recognition of revenue, which one of the following statements is correct?
For the purposes of the control concept under IFRS 15, both goods and services are assets that a customer acquires, even if only momentarily, albeit the services may not be recognized as an asset in the Statement of Financial Position.
Ability in the context of the control concept refers to a customer’s future right to direct the use of and obtain substantially all of the remaining benefits from an asset (e.g., after production when a manufacturer produces an asset).
An entity satisfies a performance obligation by transferring the promised good or service to the customer. Under IFRS 15 a good or service is considered to be transferred when the associated risks and rewards transfer to the customer.
Control of an asset refers to the ability to direct the use of and obtain substantially all of the remaining benefits from the asset. Benefits in the context of the control concept are limited to potential increases in cash inflows.
The correct statement regarding the recognition of revenue in the context of IFRS 15's control concept is:
An entity satisfies a performance obligation by transferring the promised good or service to the customer. Under IFRS 15, a good or service is considered to be transferred when the associated risks and rewards transfer to the customer.
This aligns with the principle that for the purposes of the control concept under IFRS 15, both goods and services are assets that a customer acquires, even if only momentarily, albeit services may not be recognized as an asset in the Statement of Financial Position.
The reference to "ability" in the context of the control concept refers to a customer’s future right to direct the use of and obtain substantially all of the remaining benefits from an asset (e.g., after production when a manufacturer produces an asset).
Lastly, control of an asset under IFRS 15 indeed refers to the ability to direct the use of and obtain substantially all of the remaining benefits from the asset. In the context of the control concept, benefits encompass potential increases in cash inflows, not limited to them.
