Question

Convenience Tech Shopping Ltd is a Namibian incorporated company specialising in providing online shopping via the internet. The company's standard practice is to package a customer's order for a price of $175. The company's system operates as follows: i. Customers phone through their orders to the company representatives; ii. Company advises customer services offered and the cost thereof. For future reference purposes, all telephonic conversions are recorded; iv. If the customer is agreeable to the terms provided by company representatives, a payment is made over the telephone via the customer's credit card. On successful processing of the payment made by the customer, Convenience Tech Shopping Ltd gives the customer an access code for the company's website in order to track its order. Required: Discuss whether the online shopping service provided by Convenience Tech Shopping Ltd is a contract with a customer in accordance with IFRS 15. (5)

Answer 1

IFRS 15 - It is an international financial reporting standard which is formulated by International Accounting Standards Boards providing guidance on accounting revenue from contracts with customer . We need to follow five steps for revenue recognition.  

1. We need to identify the contract with customer . There has to be customer and entity and there has to contract between these two according average 15 (9).

2. We need to find performance obligation . It is promise by entity to customer to deliver service .

3. We need to determine the transaction price.  

4. We need to allocate the transaction price to the performance obligation in the contract .

5 . We can't recognise the revenue before an entity satisfies performance obligation .

As we can see , Convenience Tech Shopping Ltd. is satisfying all the conditions which is mentioned above .