Understanding IFRS 15: When Does a Contract Asset Arise and Why It Matters in Accounting

IFRS 15 sets out the presentation requirements for contract assets and contract liabilities. Which one of the following statements is 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.

The correct statement(s) regarding the presentation of contract assets and contract liabilities under IFRS 15 are: - 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.

These statements correctly describe the nature of contract assets under IFRS 15. A contract asset represents a right to consideration that is conditional, typically depending on the entity's fulfillment of additional obligations under the contract before it can be paid. It is not unconditional like an IFRS 9 receivable, which represents an unconditional right to payment upon the passage of time.

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