IFRS 15 PDF

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Task 3 IFRS 15 is a standard related to revenue from contracts with customers. EY (2019) published that IFRS 15 applies to all entities and all contracts with customers to provide goods or services in the ordinary course of business, except certain contracts that related to leases, insurance, financial instruments, consolidation and non-monetary exchanges. Deloitte: IASPlus (2020) mentioned that the core principle of IFRS 15 is that an entity will recognise revenue that represents the transfer of promised goods or services to customers, in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. According to PWC (2017), there is a 5-step model for IFRS 15: (1) identify the contract, (2) separate performance obligations, (3) determine transaction price, (4) allocate transaction price, and (5) recognise revenue. A contract with a customer falls within IFRS 15 when the all listed conditions are fulfilled. The conditions are (1) the contract was approved or agreed by the parties to the contract, (2) each party’s rights in relation to the goods or services to be transferred can be identified, (3) the payment terms for the goods or services to be transferred can be identified, (4) the contract has commercial substance, and (5) it is probable that the consideration to which the entity is entitled to in exchange for the goods or services will be collected (Deloitte: IASPlus 2020). Besides how entity’s contractual rights to the consideration relate to its performance obligations, assessment of collectability also considers the business practices available to the entity, to manage its exposure to credit risk throughout the contract (EY 2019). The entity should assess the goods or services that have been promised to the customer, and identify as a performance obligation. The goods or services must be able to be distinct, or a series of distinct goods or services that are substantially the same, and that have the same pattern of transfer to the customer (Deloitte: IASPlus 2020). Factors to be considered as to whether a promise to transfer goods or services to the customer is not separately identifiable include, but are not limited to (1) the entity does provide a significant service of integrating the goods or services with other goods or services promised in the contract, (2) the goods or services significantly modify or customise other goods or services promised in the contract, and (3) the goods or services are highly interrelated or highly interdependent (Deloitte: IASPlus 2020). Referring to PWC (2017), transaction price is the amount to which an entity entitled to receive in exchange for the transfer of goods and services to customers, and determination of

it is straightforward when the contract price is fixed. Discounts, rebates, refunds, credits, incentives, performance bonuses, and price concessions could cause the amount of consideration to be variable. Variable consideration is only included in the transaction price if, and to the extent that, it is highly probable that its inclusion will not results in a significant revenue reversal in the future, when the uncertainty has been subsequently resolved (Deloitte: IASPlus 2020). When a contract has multiple performance obligations, transaction price will be allocated to the performance obligations by reference to their relative standalone selling prices (Deloitte: IASPlus 2020). EY (2019) mentioned that in the estimation of stand-alone selling price, an entity shall consider all information, including market conditions, entity-specific factors and information about the customer or class of customer, that are reasonably available to the entity. The entity also needs to maximise the use of observable inputs in its estimate. Where consideration is paid in advance or in arrears, the entity will need to consider whether the contract includes a significant financing arrangement and, if so, adjust for the time value of money (Deloitte: IASPlus 2020). Revenue is recognised over time or at a point in time, when the promised goods or services are transferred to the customer, and the customer obtains control (PWC 2017). Control of an asset refers to the ability to direct the use of and obtain substantially all of the remaining benefits from the asset (EY 2019). An entity recognises revenue over time if one of the listed criteria is met, which are (1) the customer simultaneously receives and consumes all the benefits provided by the entity performs, (2) the entity’s performance creates or enhances an asset that the customer controls as the asset is created, or (3) the entity’s performance does not create an asset with an alternative use to the entity and the entity has an enforceable right to payment for performance completed to date (Deloitte: IASPlus 2020). Deloitte: IASPlus (2020) published that contracts with customers will be presented in an entity’s statement of financial position as a contract liability, a contract asset, or a receivable, depending on the relationship between the entity’s performance and the customer’s payment. Presentation for revenue from contracts with customers will be that the amount or revenue recognised from contracts with customers separates from other sources of revenue. Impairment losses from contracts with customers also needed to be separated from other impairment losses, if they are not presented in the statement of comprehensive income separately (EY 2019).

For disclosure, an entity should disclose information on nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. The quantitative and qualitative information that needs to be disclosed includes entity’s contracts with customers, the significant judgements and changes in the judgements made in applying the guidance to those contracts, and any assets recognised from the costs to obtain or fulfil contract with a customer (Deloitte: IASPlus 2020). Entities are required to ensure that useful information is not obscured, by either the inclusion of a large amount of insignificant detail or the aggregation of items that have substantially different characteristics. An entity does not need to disclose information in accordance IFRS 15 if it discloses that information in accordance with another standard (EY 2019).

References Deloitte: IASPlus 2020, IFRS 15 – Revenue from Contracts with Customers, viewed 4 May 2020, . EY 2019, Applying IFRS: A closer look at IFRS 15, the revenue recognition standard, viewed 4 May 2020, . PWC 2017, IFRS 15: Revenue from Contract with Customers , viewed 4 May 2020, ....