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cma course p1 : unit5

cma course part 1 :  lectures and some questions about each unit

MR:amr taison
MR:mohamed cma
MR:desoky kh.
MR:m.batayneh
(5.1) Revenue from Contracts with Customers

1) Overview
five-step model for recognizing revenue from contracts with customers
2) Step 1: Identify the Contract with a Customer
3) Step 2: Identify the Performance Obligations in the Contract
4) Step 3: Determine the Transaction Price
5) Step 4: Allocate the Transaction Price to the Performance Obligations in the Contract
6) Step 5: Recognize Revenue when (or as) a Performance Obligation Is Satisfied
7) Balance Sheet Presentation
MR:amr taison
MR:mohamed cma
MR:desoky kh.
MR:m.batayneh
(5.2) Recognition of Revenue over Time

1) the progress toward complete satisfaction
2) performance obligation re-measured
3) The input method
4) The output method
5) the extent of the cost incurred (zero profit margin)
6) estimated loss
MR:amr taison
MR:mohamed cma
MR:desoky kh.
MR:m.batayneh
(5.3) Impairment and Disposal of Long-Lived Assets

1) Two-Step Impairment Test
2) Disposal of Long-Lived Assets
G.2020G.2021mr.amro taison
1.65.1xxx
1.75.2xxx
3.25.3lec. 7
Some Questions about unit 5
1- What are the steps for recognizing revenue from contracts with customers?
1) Determine the contract with customers
2) Determine the performance obligations in the contract
3) Determine the transaction price
4) Allocate the transaction price to each performance obligation specified in the contract
5) Revenue is recognized when the previously identified performance obligation is satisfied
2- How is the contract with customers determined?
Determining the contract results in sub-conditions, which are:-
1) That the contract must be between two parties (at least) and contains the rights and obligations of both parties
2) That the contract is approved by both parties
3) That the contract has a commercial substance
4) The contract must determine the rights and terms of payment between the two parties
5) The contract should not include the possibility of the customer breaching the payment terms
3- How are performance obligations determined in the contract?
A performance obligation is a promise to transfer a distinct good or service to the customer
4- What is the transaction price?
The transaction price is the amount of the goods or services that the company will receive from the customer
5- When the transaction price is allocated to the performance obligations in the contract?
After the performance obligations and the transaction price are specified in the contract, the transaction price is allocated to the performance obligations depending on the relative independent selling prices.
6- When can a company recognize revenue?
After the company transfers the good or service to the customer, it can recognize the revenue in its accounting records
7- When does the company recognize revenue over time?
The company recognizes revenue over time over a period of time when the fulfillment of the obligation takes a period of time rather than a specific moment.
Because the contractual commitment will be fulfilled over a certain period, the company must determine the percentage of completion of the total contractual commitment, and this percentage must be measurable or quantifiable.
8- What are the methods of recognizing revenue over time?
1) Input method
2) output method
9- What is the input method?
This method depends on the amount of inputs the company uses to fulfill the obligation, such as..
* the number of hours
* the amount of resources used
* the time required to fulfill the obligation.
* the hours of the machines work
10- What is the ouput method?
This method depends on the amount of goods or services that the customer already received; this method contains the following sub-methods:
* The percentage or quantity of fulfillment of the contract obligation
* The number or quantity of units produced
* The number and quantity of units delivered
* Completion rate
* Zero profit margin
11- What does the company record if there are an expect losses?
When the company expects that losses may be accrued during the fulfillment of the obligation, these losses must be recognized in all cases
12- According to GAAP, how is an asset price increase treated?
GAAP standards prevent the recording of the asset at market value if the market value is higher than the book value, meaning that GAAP does not recognize the increase in the value of the asset at the end of the year
13- According to IFRS, how is the increase in asset value treated?
IFRS standards allow recording an asset price increase at the end of the financial year if the market value is higher than the book value
14- According to (IFRS & GAAP) , how is the decrease in asset value treated?
The decrease in asset value is recognized by both of them. If the market value of the asset is less than the book value, the asset is recorded in the balance sheet at the market value according to GAAP & IFRS
15- According to GAAP, what are the steps for determining the decrease in asset value?
Step1: Recoverability test
Step2: Determine the Impairment or decrease in asset value
16- What is recoverability test?
This is done by comparing the book value of the asset (cost - depreciation) with the value of future cash flows of the asset without discounting.
If the book value of the asset is less than the value of future cash flows, the net book value of the asset can be recovered, meaning that there is no decrease in prices , but if the book value is greater than the value of the cash flows, the book value cannot be recovered, and therefore there is a decrease in prices, and then the next step is to determine the value of this decrease
17- How does the company record the disposal of long-term assets?
When selling those assets, a gain or loss may result, this is the difference between the net proceeds and the carrying amount of the asset.
On the date of sale, the company must…
* Recognize the depreciation of the asset
* Delete the asset from its records
* Record the loss or gains realized from the sale (if any).
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