The statement "A contract asset arises if nothing other than the passage of time is required before payment of the customer’s consideration is due" is NOT correct. A contract asset can arise even if something other than the passage of time is also required, such as the fulfillment of performance obligations. Additionally, the statement "Contract assets must be presented separately from receivables" is not a requirement; while it's true that they may be presented separately for transparency, IFRS 15 does not mandate a separate presentation. Instead, the distinction between contract assets and receivables is important as it helps financial statement users understand the specific risks associated with the entity’s rights, including the risk of non-performance and credit risk unique to each.
Distinguishing Contract Assets from IFRS 9 Receivables: Key Differences and Risks Explained
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.
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 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.
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 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.
