Skip to content

ACCA Applied Skills · Financial Reporting · Revenue

Under IFRS 15, which of the following costs must be expensed as incurred when accounting for a contract with a customer?

Costs of wasted materials and labour not reflected in the contract price must be expensed as incurred. IFRS 15 does not allow these to be capitalised, whereas direct labour, resource-generating costs and recoverable incremental acquisition costs can be capitalised.

  1. ACosts of wasted materials and labour that were not reflected in the contract priceCorrect
  2. BDirect labour costs directly related to satisfying the contract
  3. CCosts that generate resources used to satisfy the performance obligations in future
  4. DIncremental commission paid to win the contract, where the amortisation period exceeds one year

Explanation

IFRS 15 requires costs of wasted materials, labour or other resources not reflected in the contract price to be expensed. Direct labour and costs generating resources for the obligation are capitalisable fulfilment costs if criteria are met. Incremental acquisition costs with an amortisation period over one year must be capitalised if expected to be recovered.

Did you get it right without looking?

One question tells you little. A timed set on Revenue shows your real accuracy, how long you take and where you lose marks.

Practise RevenueFree diagnostic mock

More Revenue questions