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ACCA Strategic Professional · Strategic Business Reporting (International) · Revenue

Under IFRS 15, which of the following is a criterion that must be met for a contract with a customer to exist in Step 1 of the model?

A contract exists only if, among other criteria, collection of the consideration to which the entity is entitled is probable. Written form, advance payment and minimum duration are not requirements, since contracts can be oral or implied.

  1. AThe customer has paid at least half of the consideration in advance
  2. BIt is probable that the entity will collect the consideration to which it is entitledCorrect
  3. CThe contract must be in writing and signed by both parties
  4. DThe contract must have a duration of more than one year

Explanation

IFRS 15 requires approval and commitment of the parties, identifiable rights and payment terms, commercial substance, and probable collection of consideration. Contracts may be written, oral or implied, and there is no minimum duration or advance payment requirement.

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