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Week 5: Revenue from contracts with customers
1. Explain the need for a new Revenue standard
• Before, numerous standards and interpretative guidance
• A joint project by the IASB(international) /FASB(US) to develop a single principle
ü AASB 15, Effective date: 1 January 2018

2. Explain the objective and core principle outlined in AASB 15
• Objective: Establish principles so that an entity can report useful information to users of
financial statements about the nature, timing and uncertainty of revenue and cash flows
arising from a contract with a customer
• CORE PRINCIPLE: Revenue should be recognized when the good & service is provided at the
amount which the entity is expected to get.

3. Explain and apply the five steps identified by AASB 15 in recognising revenue
Step1: identify the contract 与客户确认合同
ü approved by all sides in the agreement
ü Identify each party’s rights to goods and services & obligation about payment
ü Commercial substance (expected to receive cash)
ü The entity probably will collect the consideration. (assess collectability)

Step2: ***identify performace obligations 确定义务
• a promise to transfer goods or services to a customer 承诺
• Each promise in the contract can be either: A distinct good and service (or a combination of
good and service) 独特?
Is distinct if BOTH criteria are met (Para 27 AASB 15):
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1.Customer can benefit either on its own or in conjunction with readily available resources
2.The entity’s promise to transfer is separately identifiable from other promises
ü No significant integration of goods or services with other promises in the contract
ü The goods or services does not significantly modify another goods or services
ü The goods or services are not highly related or dependent on other
Step3: Determine the transaction price
• the amount of consideration to which the entity is expected to get from the exchange
• Affected by 4 main elements:
1) Variable consideration: discounts, volume rebates, refund
ü Expected value method: sum of probability-weighted amounts
ü Most likely amount: Single most likely amount from a set of possible outcomes
2) Significant financing component: adjust the time value of money, eg:1
3) Non-cash consideration: Eg: shares
ü measured at FV (quoted identical share price in active market)
ü If not available, selling price of comparable goods should be used
4) Consideration payable to a customer: reduction of the transaction price
Step4: Allocate price
• on a relative stand-alone selling price basis (SSP): The price at which an entity would sell a
promised good or service separately to a customer.
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Step5: recognize revenue as obligation satisfied
• by transferring a promised good or service (i.e. an asset) to a customer
• Performance obligations are satisfied either:
ü At a point in time or Over time
• For PO satisfied over time, revenue is recognised over time by measuring the progress
toward complete satisfaction of the PO.
• 2 methods for measuring progress:
ü Output method: goods and services value transferred relative to the remaining
ü Input method: inputs used relative to the total expected inputs
Apply the recognition criteria prescribed in AASB 15, and understand the difference between
recognition at a point in time vs recognition over time
Point in time: voucher
ü At the date the performance obligation is completed
ü At the date it is redeemed
Overtime:
See Ltd enters into a contract with Tee Ltd to build a double storey home for a total
consideration of $500,000. At the commencement of the contract, See estimates that the total
costs of the contract is $350,000.
As at 30 June 2018, See Ltd has incurred the following costs
ü Labour costs $ 110,000
ü Material costs 170,000
ü Required: What is the amount of revenue recognised using the input method?
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Comprehensive Example
To improve its business, Uni Coffee Club Ltd has introduced a loyalty scheme for its customers.
Under this scheme, it offers a free cup of barista made coffee for every 9 cups of coffee
purchased. The selling price for a cup of coffee is $4.00.
– Prepare journal entries to account for the about transaction
ü When the 1st cup of coffee is sold
ü When the 10th cup of coffee is provided for free
Describe the disclosure requirements
• Contracts with customers
ü Information includes disaggregation of revenue
ü Contract balances
ü Performance obligations
ü Transaction price allocated to remaining Pos
• Significant judgements regarding timing of satisfaction of POs, determination of transaction
price etc
• Assets recognised from the costs to fulfil a contract with a customer
Eg:1=> Alpha Ltd manufactures solar powered long life batteries. It enters into a contract with
a customer on 1 July 2018 to manufacture 1000 batteries at $221.616 per battery. Payment
is due in 2 year’s time.
ü Cost to manufacture each battery is $130
ü Cash selling price is $190 each
ü Implicit interest rate is 8%
Prepare journal entries: On 1 July 2018, 30 June 2019, 30 June 2020
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PASS 不是我们的代言 H1 才是我们的目标

ACCT20002
IFA2
Tutorial 2-3 (W3-4)
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Week 4 Income Taxes
1. Understand tax effect accounting and the difference between tax expense and tax payable
Ø Income tax expense (company)
• based on accounting profit (Accounting Income less Accounting Expense)
• accrual accounting (occurrence)
Ø Income tax payable (business)
• based on taxable profit (Assessable Income less Allowable Deductions)
• cash-basis accounting (evidence, ‘substantiating event’)
Ø timing differences
• transactions are accounted for in different periods/not llowed either under tax rules or
under accounting rules
• result in
o permanent differences (do not offset over time,只被一个 recog, no impact)
ü income that is NEVER assessable under tax legislation
e.g. capital gains on pre-1985 investments, some foreign income
ü expenses that are NOT allowable deductions under tax legislation
e.g. entertainment expenses paid, goodwill impairment
ü tax incentives
o temporary differences TD (两个都 recog, offset over time)
ü deductible temporary differences(DTD) or taxable temporary differences (TTD)
ü Deferred Tax Assets (DTA) or Deferred Tax Liabilities (DTL)

2. Understand the term ‘taxable temporary differences’ and ‘deductible temporary differences’
Ø DTA: Amount of income taxes recoverable in future periods in respect of
• Deductible TD
• The carry forward of unused tax losses
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Ø DTL: Amount of income tax payable in future periods in respect of TD
3. Calculate and account for both current tax and deferred tax
Ø balance sheet approach:
• Step 1: current tax worksheet, taxable profit, tax payable, tax ATO want?
• Step 2: deferred tax worksheet, temporary difference
• Step 3: income tax expense, tax company pay?
Ø CA: Carrving amount of asset in the Balance Sheet
Ø FTA: (future revenue) An asset generates EB which are assessable under tax legislation.
• assumption is that an asset will at least be able to generate EB equal to the CA of the
asset. Hence FTA = CA, eg: inventory, PPE
• If the asset does not generate EB that are assessable then FTA=0, eg: AR
Ø FDA: (future expense) The amount of future allowable deductions that can be claimed for
an asset
Ø TB of Asset: TB = CA + FDA – FTA
Ø TB for Liability: TB = CA + FTA – FDA
Ø Except: Unearned revenue: TB = CA – future Non-assessable amount
.
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4. Appland account for the recognition criteria for deferred tax liabilities and deferred tax assets
including reversal of deferred tax assets and treatment of tax losses
L A
CA>TB (FTA>FDA) DTA DTL
CAØ
5. Understand and account for the deferred tax consequences for revaluation of non- current
assets
Ø Revaluation of non-current Assets (only land)
• Revaluation increase: CA > TB => DTL
• Revaluation decrease: CA< TB => DT
• Eg: land revalue up 60K
•
Ø Tax losses
• Allowable deductions > Taxable income (creation of a DTA)

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• When the entity earns taxable profit in the future, then the DTA is reversed:
•
Ø Change in tax rate:
1) Opening balances of deferred tax assets and liabilities is adjusted as follows:
2) Opening balance * (New tax rate – Old tax rate)/Old tax rate
3) If tax rate increases, income tax income
4) If tax rate decreases, income tax expense