IFRS 15 has special guidance for contract modifications. Which of the following statements is NOT...
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IFRS 15 has special guidance for contract modifications. Which of the following statements is NOT accurate? Select all that apply.
A modification cannot be accounted for prior to the parties reaching final agreement on the change in scope and/or price of the contract because the rights and obligations that are created or changed by a modification must be enforceable.
Contract modifications that are accounted for as an adjustment to the original contract are accounted for on a cumulative catch-up basis because accounting for changes on a prospective basis would not be adjusting for the modification.
In some industries, contract modifications occur with great regularity. For example, in the construction industry changes in what is being built or how the build occurs and/or changes in price can occur frequently in relation to a contract.
When a contract modification occurs, provided the parties rights and obligations are enforceable, the modification must be accounted for as an adjustment to the existing (or original) contract and not as a new separate stand-alone contract.
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