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.
A. 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.
B. 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.
C. 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.
D. 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.
D. 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.
This statement is not correct according to IFRS 15 and IFRS 9. A contract asset can arise in situations where the entity has transferred goods or services to a customer but the right to consideration is conditional on something other than the passage of time, such as the occurrence of a future event. Furthermore, there is no strict requirement under IFRS that contract assets must be presented separately from receivables; rather, it is stated that same contract's contract assets and contract liabilities should be netted in the balance sheet, not necessarily presented separately from receivables.
