PwC Vietnam Services Audit & assurance services

IFRS 15: Revenue

from Contract with
Customers

About IFRS 15

International Financial Reporting Standard

(IFRS) 15: Revenue from Contracts with
Customers was introduced by the International
Accounting Standards Board to provide one
comprehensive revenue recognition model for
all contracts with customers to improve
comparability within industries, across
industries, and across capital markets.

The new rules on revenue recognition became

effective from 1 January 2018 and it replaces
former revenue recognition standards ( IAS 11 -
Construction Contracts, IAS 18 - Revenues)
and most of other revenue recognition
guidance (IFRIC 13 - Customer Loyalty
Programmes, IFRIC 15 - Agreements for the
Construction of Real Estates, IFRIC 18 -
Transfers of Assets from Customers, and SIC
31 - Revenue - Barter Transactions Involving
Advertising Services).

For many companies the impact will be

manageable. But for those with large numbers
of customer contracts, diverse or constantly
changing terms, the impact could be significant
unless action has been taken to mitigate the
impact of IFRS 15.

Here's what you need to know:

Why it matters Some of the impact you could face

What should you consider Next steps

It replaces all existing revenue recognition

under the International Financial Reporting
Standards

It may result in a substantial change in the

amount and timing of revenue recognition

Significantly more qualitative and

quantitative disclosures are required

5-step model

The core principle of IFRS 15 is that revenue is

recognised when the goods or services are
transferred to the customer, at the transaction
price. Revenue is recognised in accordance
with that core principle by applying a 5-step
model as shown below.

Separate Determine Allocate Reco

perfor- transac- transac- nise
mance tion price tion price enu
obliga-
tions

Step 3: Determine the

transaction price
Transaction price is the amount of the
consideration an company is entitled to
receive in exchange for transferring goods
or services to customers.

Determining the transaction price is

straightforward when the contract price is
fixed: it becomes more complex when it is
not fixed.

Discounts, rebates, refunds, credits,

incentives, performance bonuses, and price
concessions could cause the amount of
consideration to be variable.

In situations where there are variable

considerations, transaction price is
estimated based on the expected value or
the most likely amount but is constrained
up to the amount that is highly probable of
no significant reversal in the future.

The minimum amount that meet this criteria

is included in the transaction price.

Assess your experience with similar types

of performance obligations in making this
determination.

Interested in IFRS alert?

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Useful resources

IFRS 15: revenue reporting’s global

makeover

Read our expert's insights on IFRS 15

PwC's IFRS 15 the basics –

Introduction to the standard

The PwC revenue specialists have started a

new series of videos covering IFRS 15:
Revenue from Contracts with Customers. The
short video series are intend to quickly help you
understand IFRS 15. This first video covers the
basic principles including the 5 step model in
IFRS 15.

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