A Revised Framework For Recognizing And Measuring Revenue

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Revenue Recognition under AASB 15 AASB 15 provides a revised framework for recognizing and measuring revenue. According to AASB Standard (2014), AASB 15 Revenue from Contracts with Customers has the main objective to establish principles applied to provide information on financial statements about the nature, amount, timing and uncertainty of revenue and cash flows that arises when a contract is made with a customer to all those who are involved. The process involves a five step approach as shown below. Although they look simple, every step follows a set of different rules and obligations which require companies to make various estimates and disclosures. 1. Identify the contract with a customer According to AASB Standard (2014), a contract is ‘an agreement between two or more parties that creates enforceable rights and obligations’. AASB 15 requires to be applied on all the contracts that are approved by customers and their parties. One of the other requirement of AASB 15 is that an entity, in some cases, needs to combine their contracts and make them as one. AASB 15 also provides requirements to audit contract modifications. 2. Identify performance obligations in the contract Performance obligations are ‘distinct’ promises made by entities to their customers to transfer their goods and services. When we say goods or services are distinct, it means a customer can benefit from them on its own or together with other resources available to the customer

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