ACA ICAEW Financial Accounting and Reporting Practice Exam

To determine if a transfer constitutes a sale under IFRS 15, it is essential to evaluate the proportion of the asset that is retained as a right of use asset. IFRS 15 focuses on the transfer of control of an asset rather than merely the risks and rewards associated with ownership. When an entity transfers an asset but retains a right to use that asset, it needs to assess what portion of the asset remains under its control, as this affects whether the transaction can be recognized as a sale or if it should be treated as a financing arrangement or lease.

This evaluation is crucial because if a significant portion of the asset is retained, it may indicate that the transfer does not fully meet the criteria for revenue recognition as a sale since the seller still has certain rights regarding the use of the asset. Consequently, this information will help determine whether the sale is complete under the standards set by IFRS 15, where control over the asset's use is a key factor.

The other choices—such as the carrying amount of the asset sold, the market value of the asset, and the discount rate applied to future cash flows—while they may be relevant for different aspects of financial reporting and valuation, do not directly inform whether the transfer of the asset constitutes a