The statement "A modification cannot be accounted for prior to the parties reaching final agreement on the change in scope and/or price of the contract" is NOT accurate. According to IFRS 15, a contract modification should be accounted for as an adjustment to the existing contract when the modification meets the criteria for enforceable rights and obligations, even if the parties haven't reached final agreement on the change in scope and/or price. This reflects the principle that a contract modification is an alteration to the original contract's terms, not necessarily requiring a formalized agreement before accounting for it.
The statement "When a contract modification occurs, provided the parties' rights and obligations are enforceable, the modification must be accounted for as an adjustment to the existing (or original) contract and not as a new separate stand-alone contract" is accurate, as it aligns with IFRS 15's guidance on treating modifications as part of the original contract, unless the modification adds clearly distinguishable goods or services and meets the criteria for a separate performance obligation.
The statement "Contract modifications that are accounted for as an adjustment to the original contract are accounted for on a cumulative catch-up basis because accounting for changes on a prospective basis would not be adjusting for the modification" is also accurate. Under IFRS 15, a cumulative catch-up method is typically used to recognize the effect of a modification on the transaction price.
Lastly, the statement about the frequency of contract modifications in the construction industry, noting that changes in scope, build process, or price can occur frequently, is a factual observation and not directly related to the accounting treatment but is relevant to the context in which contract modifications often arise in practice.
In summary, only the first and third statements are inaccurate according to the principles outlined in IFRS 15. The second and fourth statements accurately reflect the accounting treatment for contract modifications under the standard.
