Lernmaterialien für Strategic Business Reporting IFRS an der Ho Chi Minh City University of Economics

1. Contract

2. Performance obligation

3. Transaction price

4. Allocate transaction price

5. Recognise revenue

Advantages

Residual wealth = profit deduct cost of capital , adjusted for taxes on cash basis

- Maximisation EVA create wealth for shareholders

- Less distorted by accounting policies, more to cash flow than accounting profits

- Advertising and development = investment for the future

Focus on efficient use of capital

Conceptual Framework identifies primary users as present and potential investors, lenders and other creditors.

Primary users need information - entity's prospects for future net cash flows and how mgt uses resources avallable to them -> statement of CF is essential in providing this information.

From point of view of primary users, important advantage of direct method is that can easily understand actual cash flow. Direct method disclose information not available elsewhere, use in estimating future cash flow.

Indirect method is less easily understood as it requires a level of accounting knowledge to understand, less useful to primary users than the direct method.

From point of view of preparer, indirect method is easier to prepare. Direct method is costly as it requires information not otherwise available..

Indirect method more open to manipulation. It is arguably easier to "hide" missclassification to manipulate operating cash flow to improve bonus prospects..

Indirect method would not be more useful and informative to users than the direct method

a/ exist= agreement with enforceable rights and obligations

b/ all criteria to meet (5):

- Approved contract

- entity identifies each party's rights

- entity identifies payment term

- Commercial substance (risk, timing and amt of future CF as a result of the contract)

- Probable that entity will collect the consideration