Professional Documents
Culture Documents
Ifrs 15 R
Ifrs 15 R
Ifrs 15 R
IAS 18 Revenue
IFRS 15
IAS 11 Construction Contracts Revenue from
Contracts
SIC 31 Revenue Barter Transaction
with Customers
Involving Advertising Services
Non-monetary exchanges between entities within the same business to facilitate sales
Complex contract
Mortgage at fair value under IFRS 9
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Oral / written?
Contract Promises
modification? Are they distinct?
Fixed? Variable? Stand-alone selling prices
Over time?
At the point of time?
ABC Johnny
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Example #1: telecom co. / bundle offers 12-m. monthly plan at 100 CU/month
+ Free handset
Attributes
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Combination of contracts
The goods or services in the contracts (or some of them in each contract) are
a single performance obligation.
Contract modifications
= change in the scope, or price, or both => must be approved by the parties!
Prior approval => Based on enforceability!
Made a CLAIM
Access provided after 90 days => Constructor
= contract modification even if not approved
(enforceable)
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Contract modifications
Performance obligations
PO can be both explicit (in the contract) and implicit (based on practices or policies)
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Examples:
Granting licenses
2. Criteria
=> Entity is NOT using good/service as an input to produce or deliver combined output
=> The good/ service does NOT significantly modify or customize another good/service
=> The good/ service is not highly dependent with other goods/services in the contract
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Installation
Customer Contract Software developer
Software updates
Technical support
Scenario I
- Software remains functional during installation - Installation will customize software substantially
- Installation performed by other entities, too - Installation performed by other entities, too
- Other services sold also separately - Other services sold also separately
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PRINCIPAL AGENT
Indicators
- Primary responsibility for fulfilling the contract - Consideration = commission
- Inventory risk - Customers credit risk
- Establishing prices
Variable consideration
Constraining estimates in variable consideration likelihood + magnitude of reversal
Existence of significant financing component (over 1 year)
Non-cash consideration At fair value
For distinct good/service =>as purchases
Consideration payable to a customer
Not for distinct good/service =>reduction in TP
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STEP 4
Allocation =to allocate the transaction price to each performance obligation in an amount
objective that depicts the amount of consideration for transferring promised goods/services.
=> Based on relative stand-alone selling prices Criteria to apply the exception:
except for:
Entity regularly sells each distinct good/service on a stand-alone basis
Bundles are also sold regularly on a stand-alone basis at a discount to
Allocating discounts stand-alone selling prices of goods/services
Discount attributable to each bundle is substantially the same as
discount in the contract + analysis provides evidence
= CU 40 CU 29 (40/140*100) CU 40
Product A = CU 60 Product A Product A
= CU 55 Product B CU 39 (55/140*100) CU 33 (55/100*60)
Product B + (discount Product B Product B
= CU 45 CU 32 (45/140*100) CU 27 (45/100*60)
Product C of CU 40) Product C Product C
= CU 140 Product C CU 100 CU 100
(general) (exception)
STEP 4
Allocation =to allocate the transaction price to each performance obligation in an amount
objective that depicts the amount of consideration for transferring promised goods/services.
=> Based on relative stand-alone selling prices Criteria to apply the exception:
except for:
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STEP 4
= the price at which the entity would sell promised good
Stand-alone selling price
or service separately to the customer (at contract inception)
Combination
STEP 5
Performance obligation is satisfied when a promised good or service is transferred to a customer.
Control
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STEP 5
Performance obligation is satisfied Over time if 1 of the following is met:
Entity does not create an asset with an alternative use + enforceable right to payment
=> Select single revenue recognition method + apply consistently (no change is permitted)
STEP 5
Performance obligation is satisfied At the point of time if control not transferred over time.
Indicators:
The customer has the significant risks and rewards of ownership of the asset.
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Capitalize Direct labor General + admin costs
Direct materials Wasted costs
+Amortize
Allocated costs Costs of past performance
Chargeable costs Indistinguishable costs
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Right of return
Not expected to be returned Expected to be returned
Recognize revenue. Revenue not recognized
The entries required The entries required
Contract asset Right to recover asset
Revenue Refund liability
Receivable
Contract asset
Warranties-Decision tree
No
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No
When comparing re-purchase price, consider time value of
money
Account for contract as
financing arrangement If the contract is financing arrangement, the entity will
continue to recognize the asset and will also recognize
the financing liability.
If the option lapses un-exercised, an entity will derecognize
the liability and will recognize the revenue.
Put option
Obligation to repurchase at
customers request
Repurchase price more than the Yes Account for the contract under
selling price? IFRS 9 as financing
arrangement
No
When comparing re-purchase price, consider time value of
money
Recognize revenue under IFRS
15 If the option lapses un-exercised, an entity will derecognize
the liability and will recognize the revenue.
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Yes
Yes
Yes
Revenue is recognized on
satisfaction of performance
obligation
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Yes
Revenue is recognized
Licenses
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No
= retrospectively to each prior reporting period = retrospectively with cumulative effect at the
date of initial application
Expedients:
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