The statement "A contract asset is conditional and therefore an IFRS 9 receivable if nothing other than the passage of time is required before payment of the consideration is due" is NOT correct in the context of IFRS 15. According to IFRS 15, a contract asset arises when an entity has performed its obligations and has a right to receive consideration from the customer, but that right is conditional on the entity transferring the goods or services to the customer. Conversely, a contract asset is not automatically considered an IFRS 9 receivable solely because only the passage of time is required before payment; the conditionality of the right to consideration is key in determining whether it's classified as a contract asset or an IFRS 9 financial asset.
Understanding Conditional Contract Assets and Liabilities under IFRS 15: Common Misconceptions Explained
IFRS 15 sets out the presentation requirements for contract assets and contract liabilities. Which one of the following statements is NOT correct? Select all that apply.
When the customer performs first by prepaying its promised consideration the entity has a contract asset and has the obligation to transfer the goods or services.
A contract asset arises if an entity has a right to an amount of consideration that is conditional before the entity transfers a good or service to the customer.
A contract asset is conditional if an entity must first satisfy another performance obligation in the contract before it is entitled to payment from the customer.
A contract asset is conditional and therefore an IFRS 9 receivable if nothing other than the passage of time is required before payment of the consideration is due.
