Question 1

Revenue is the only form of income.

Accepted Answer

Income can come in various forms, such as revenue, interest, capital gains, and dividends.

Question 2

Which is the most important recognition criteria under IAS 18 for revenue from services rendered?&#10;A)The revenue amount can be reliably measured&#10;B)The stage of completion of the transaction at the balance sheet date can be reliably measured&#10;C)It is probable that the economic benefits from the transaction will flow to the providing entity&#10;D)The costs incurred for both the transaction and implementing the services can be reliably considered

Accepted Answer

B

Question 3

Which of the following two criteria are required for an entity to recognize interest as revenue?&#10;A)The amount of revenue can be reliably measured; the costs of the asset can be reliably measured&#10;B)The amount of revenue can be reliably measured; it is probable that the economic benefits of the transaction will flow to the entity&#10;C)It is probable that the economic benefits of the transaction will flow to the entity; the costs of the asset can be measured.&#10;D)The costs of the asset can be measured; the interest has accrued over one year

Accepted Answer

To recognize interest as revenue, two criteria are required. Firstly, the amount of revenue should be reliably measured, which means the entity can determine how much interest it is earning. Secondly, it is probable that the economic benefits of the transaction will flow to the entity, meaning that the entity can reasonably expect to receive the interest revenue. Choice A mentions the first criteria, but not the second. Choice C mentions the second criteria, but not the first. Choice D is incorrect as it mentions a time period (one year) which is not relevant to recognizing interest revenue.

Question 4

According to the core principle of the new standard being prepared to replace IAS 18 and IAS 11,revenue should be recognized to depict:&#10;A)The transfer of goods or services in an amount which reflects the fair value of the goods or services&#10;B)The transfer of goods or services in an amount which reflects the entity's' outlay costs&#10;C)The transfer of goods or services in an amount which reflects the consideration the entity expects to receive&#10;D)The transfer of goods or services in an amount which reflects the entity's' possible losses if the buyer becomes unable to pay

Accepted Answer

The core principle of the new standard replacing IAS 18 and IAS 11 is that revenue should be recognized in a way that reflects the consideration an entity expects to receive in exchange for those goods or services. This approach focuses on the transaction price agreed upon between the entity and its customer.

Question 5

Management must choose the most reliable method of estimating the percentage- of- completion recognition of revenue

Accepted Answer

Management must choose the most reliable and appropriate method of estimating the percentage of completion recognition of revenue based on the nature of the project and the available information. This is important for determining the timing and amount of revenue recognition and ensuring accurate financial reporting.

Question 6

Revenue includes inflow from contributions from equity participants.

Accepted Answer

Revenue typically refers to the income earned from the sale of goods or services related to the company's primary operations, whereas contributions from equity participants are considered financing activities, not revenue.

Question 7

The revenue from a dividend can be recognized at any time.

Accepted Answer

The revenue from a dividend can only be recognized when the dividend is declared by the company's board of directors. The date of declaration is usually when the revenue is recognized by the recipient.

Question 8

Under IAS 18,which of these barter transactions would not produce revenue?&#10;A)a farmer exchanges a crop of carrots for seeds&#10;B)bullion is exchanged for finished silverware&#10;C)Two gas suppliers swap an identical amount of gas so that both can provide services in both locations&#10;D)An accountant does the tax return for a restaurant in exchange for free meals

Accepted Answer

Under IAS 18, revenue from barter transactions involving the exchange of goods or services is recognized only when the entity can reliably measure the fair value of the goods or services received and given. The exchange between two gas suppliers swapping an identical amount of gas does not result in a real increase in the resources of either party that can be measured reliably in terms of fair value, as it essentially represents a mutual exchange of identical assets. This differs from the other scenarios where the exchanges involve goods or services of different nature and value, which can potentially be measured and recognized as revenue.

Question 9

Revenue on a lay - away sale is recognized when the significant risks and rewards are transferred to the buyer

Accepted Answer

Revenue on a lay-away sale is recognized when the significant risks and rewards are transferred to the buyer, which typically occurs when the final payment is made and the buyer takes possession of the product.

Question 10

Which three types of transaction produce revenue under IAS 18?&#10;A)sale of goods; the use of an asset yielding interest; an increased fair value of an asset&#10;B)sale of goods; provision of services; the use of an asset yielding interest&#10;C)provision of services; an increased fair value of an asset; a dividend from an associated company&#10;D)a dividend from an associated company; sale of goods; the use of an asset yielding interest

Accepted Answer

According to IAS 18, revenue can be recognized for the sale of goods and the provision of services. Additionally, revenue can be recognized from the use of an asset yielding interest (such as interest on a loan or investment). Option A includes "an increased fair value of an asset," which is not a transaction that typically produces revenue under IAS 18. Option C includes "a dividend from an associated company," which is not a transaction between the entity and its customers and would not be accounted for as revenue. Option D includes "a dividend from an associated company" (not a transaction with customers) and "the use of an asset yielding interest" (which is included in option B). Therefore, the best choice is B.

Deck 19: Revenue