ifrs 15 revenue - nelson cpa · ias 18 revenue c. ifric‐int13 ... –lease contractswithin the...

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2014 Nelson Consulting Limited 1

IFRS15Revenue(AbridgedVersion) 17November2014

LAMChiYuenNelsonMBAMScBBAACAACSCFACGMACPA(US)CTAFCCAFCPAFCPA(Aust.)FHKIoD FTIHKMHKSIMSCA


IFRS15Issuedin2014

1.IdentifytheContractwithaCustomer

2.IdentifythePerformanceObligations

3.DeterminetheTransactionPrice

4.AllocateTransactionPricetoPerformance

Obligations

5.RecogniseRevenueWhenaPerformanceObligationisSatisfied

IFRS15 establishesacomprehensiveframeworkfordetermining when torecogniserevenueand howmuch revenuetorecognise.

Thecoreprincipleinthatframeworkisthatanentityrecognisesrevenue todepictthetransferofpromisedgoodsorservicestocustomers

inanamountthatreflectstheconsiderationtowhichtheentityexpectstobeentitledinexchangeforthosegoodsorservices

UnderIFRS15,anentityappliesa5stepapproach inrecognisingrevenue

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IFRS15Issuedin2014





Obligations


EffectiveDate AnentityshallapplyIFRS15forannualreportingperiodsbeginningonorafter1January2017.

Earlierapplicationispermitted. IfanentityappliesIFRS15,itshalldisclosethatfact.


IFRS15Issuedin2014





Obligations


IFRS15supersedesthefollowingStandards:a. IAS11ConstructionContractsb. IAS18Revenuec. IFRICInt 13CustomerLoyaltyProgrammesd. IFRICInt 15AgreementsfortheConstructionof

RealEstatee. IFRICInt 18TransfersofAssetsfromCustomersf. SIC31Revenue BarterTransactions

InvolvingAdvertisingServices

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ContentsinIFRS15Issuedin2014





Obligations


A. ObjectiveB. ScopeC. Recognition

Identifyingthecontract(Step1) Identifyingperformanceobligations(Step2) Satisfactionofperformanceobligations(Step5)

D. Measurement Determiningthetransactionprice(Step4) Allocatingthetransactionpricetoperformanceobligations(Step5)

E. ContractcostsF. PresentationG. Disclosure

Today,aimsat Generalunderstanding Fullcoverage Futurereference


BriefSummaryofChangesExistingPractice IFRS15 UsingIAS11 and 18,IFRIC Int.13,

15,and18,andSIC31 UsingIFRS15,onestandardonly

Inconsistentanddiversifiedpractices

Single andunified5step revenuerecognitionmodel

Riskandrewardapproachinsatisfying recognition

Controlapproachinsatisfying theperformanceobligation

Limitedguidanceon multipleelementarrangements,variableconsideration,licencesandetc.

Moreguidance onseparatingelements,allocatingthetransactionprice,licences,andetc.

Newestimatesandjudgementsrequired

Newsetofdisclosurerequirements

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A.Objective

TheobjectiveofIFRS15is toestablishtheprinciplesthatanentityshallapplytoreport

usefulinformationtousersoffinancialstatementsaboutthenature,amount,timinganduncertaintyofrevenueandcashflowsarisingfromacontractwithacustomer(IFRS15.1)

Tomeettheobjective ThecoreprincipleofIFRS15isthatanentityshallrecogniserevenue

todepictthetransferofpromisedgoodsorservicestocustomers inanamountthatreflectstheconsiderationtowhichtheentityexpectstobeentitledinexchangeforthosegoodsorservices.(IFRS15.2)

WhenapplyingIFRS15,anentityshall considerthetermsofthecontractandallrelevantfactsandcircumstances applyIFRS15,includingtheuseofanypracticalexpedients,consistentlyto

contractswithsimilarcharacteristicsandinsimilarcircumstances.(IFRS15.3)


A.Objective

IFRS15specifiestheaccountingforanindividualcontract withacustomer However,asapracticalexpedient,anentitymayapply

IFRS15 toaportfolioofcontracts (orperformanceobligations)withsimilarcharacteristics iftheentityreasonablyexpects thattheeffectsonthefinancialstatementsofapplyingIFRS15totheportfoliowouldnotdiffermaterially fromapplyingIFRS15totheindividualcontracts(orperformanceobligations)withinthatportfolio

Whenaccountingforaportfolio,anentityshalluseestimatesandassumptionsthatreflectthesizeandcompositionoftheportfolio.(IFRS15.4)

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B.Scope

AnentityshallapplyIFRS15toallcontractswithcustomers,exceptthefollowing: leasecontracts withinthescopeofIAS17Leases; insurancecontracts withinthescopeofIFRS4InsuranceContracts; financialinstrumentsandothercontractualrightsorobligations withinthe

scopeof IFRS9FinancialInstruments,(orIAS39ifIFRS9notyetapplied) IFRS10ConsolidatedFinancialStatements,IFRS11JointArrangements,IAS27SeparateFinancialStatements andIAS28InvestmentsinAssociatesandJointVentures;and

nonmonetaryexchanges betweenentitiesinthesamelineofbusiness tofacilitatesales tocustomersorpotentialcustomers Forexample,IFRS15wouldnotapplytoacontractbetweentwooilcompaniesthatagreetoanexchangeofoiltofulfildemandfromtheircustomersindifferentspecifiedlocationsonatimelybasis.(IFRS15.5)


B.Scope

AnentityshallapplyIFRS15toacontract(otherthanacontractlistedabove)onlyifthecounterpartytothecontractisacustomer.(IFRS15.6)

IFRS15defines: Acontract isanagreementbetweentwoor

morepartiesthatcreatesenforceablerightsandobligations

Acustomer isapartythathascontractedwithanentitytoobtaingoodsorservicesthatareanoutputoftheentitysordinaryactivitiesinexchangeforconsideration

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B.ScopeExample

Acounterpartytothecontractwouldnotbeacustomerif,forexample, thecounterpartyhascontractedwiththeentity

toparticipateinanactivityorprocess inwhichthepartiestothecontractshareintherisksandbenefits thatresultfromtheactivityorprocess(suchasdevelopinganassetinacollaborationarrangement)

ratherthantoobtaintheoutputoftheentitysordinaryactivities.(IFRS15.6)


B.Scope

Acontractwithacustomermaybe partiallywithinthescopeofIFRS15and partiallywithinthescopeofotherStandardsoutsidetheIFRS15scope

a. IftheotherStandardsspecifyhowtoseparateand/orinitiallymeasureoneormorepartsofthecontract,thenanentityshallfirstapplytheseparationand/ormeasurementrequirementsinthoseStandards Anentityshallexcludefromthetransactionpricetheamountofthepart(orparts)ofthecontractthatareinitiallymeasuredinaccordancewithotherStandardsandshallapplyHKRS15.7386toallocatetheamountofthetransactionpricethatremains(ifany)toeachperformanceobligationwithinthescopeofIFRS15andtoanyotherpartsofthecontractidentifiedaspoint(b)below

b. IftheotherStandardsdonotspecifyhowtoseparateand/orinitiallymeasure oneormorepartsofthecontract,thentheentityshallapplyIFRS15 toseparateand/orinitiallymeasurethepart(orparts)ofthecontract(IFRS15.7)

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B.Scope

IFRS15specifiestheaccounting fortheincrementalcostsofobtainingacontract withacustomerand forthecostsincurredtofulfilacontract withacustomerifthosecostsare

notwithinthescopeofanotherStandard (seeIFRS15.91104) Anentityshallapplythoseparagraphsonlytothecostsincurredthatrelatetoacontractwithacustomer(orpartofthatcontract)thatiswithinthescopeofIFRS15.(IFRS15.8)


C.RecognitionandD.Measurement





Obligations


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C.Recognition




Step1:IdentifyingtheContract(s) Combinationofcontracts Contractmodifications

Step2:IdentifyingPerformanceObligations Promisesincontractswithcustomers Distinctgoodsorservices

Step5:Satisfactionofperformanceobligations Performanceobligationssatisfiedovertime Performanceobligationssatisfiedatapointin

time Measuringprogresstowardscomplete

satisfactionofaperformanceobligation


Step1:IdentifytheContract(s)


Step1:IdentifyingtheContract(s) Acontractisanagreementbetweentwoor

morepartiesthatcreatesenforceablerightsandobligations.

TherequirementsofIFRS15applytoeachcontract thathasbeenagreeduponwithacustomerandmeetsspecifiedcriteria. Insomecases,IFRS15requiresanentityto

combinecontracts andaccountforthemasonecontract.

IFRS15alsoprovidesrequirementsfortheaccountingforcontractmodifications.(IFRS15.IN7)

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Anentityshallaccountforacontractwithacustomer thatiswithinthescopeofIFRS15onlywhenallofthefollowingcriteria(i.e.contractcriteria)aremet:a. thepartiestothecontracthaveapprovedthecontract (inwriting,orally

orinaccordancewithothercustomarybusinesspractices)andarecommittedtoperformtheirrespectiveobligations;

b. theentitycanidentifyeachpartysrights regardingthegoodsorservicestobetransferred;

c. theentitycanidentifythepaymentterms forthegoodsorservicestobetransferred;

d. thecontracthascommercialsubstance(i.e.therisk,timingoramountoftheentitysfuturecashflowsisexpectedtochangeasaresultofthecontract);and



Anentityshallaccountforacontractwithacustomer thatiswithinthescopeofIFRS15onlywhenall ofthefollowingcriteria(i.e.contractcriteria)aremet:e. itisprobable thattheentitywillcollecttheconsideration towhichitwill

beentitledinexchangeforthegoodsorservicesthatwillbetransferredtothecustomer. Inevaluatingwhethercollectabilityofanamountofconsiderationis

probable,anentityshallconsideronlythecustomersabilityandintentiontopay thatamountofconsiderationwhenitisdue.

Theamountofconsiderationtowhichtheentitywillbeentitledmaybelessthanthepricestatedinthecontractiftheconsiderationisvariablebecausetheentitymayofferthecustomerapriceconcession(seeIFRS15.52)(IFRS15.9)

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Enforceabilityoftherightsandobligationsinacontractisamatteroflaw. Contractscanbewritten,oralorimpliedbyanentityscustomarybusiness

practices. Thepracticesandprocessesforestablishingcontractswithcustomersvary

acrosslegaljurisdictions,industriesandentities. Inaddition,theymayvarywithinanentity(forexample,

theymaydependontheclassofcustomerorthenatureofthepromisedgoodsorservices).

Anentityshallconsiderthosepracticesandprocesses indetermining

whetherandwhenanagreementwithacustomercreatesenforceablerightsandobligations.(IFRS15.10)

IFRS15definesacontract as: Anagreementbetweentwoormorepartiesthatcreatesenforceable

rightsandobligations



AnentityshallapplyIFRS15tothedurationofthecontract (iethecontractualperiod)inwhichthepartiestothecontracthavepresentenforceablerightsandobligations. somemayhavenofixeddurationandsomemayautomaticallyrenew

ForthepurposeofapplyingIFRS15,acontractdoesnotexistif eachpartytothecontracthastheunilateralenforceableright toterminate

awhollyunperformedcontract withoutcompensating theotherparty(orparties). Acontractiswhollyunperformed ifbothofthefollowingcriteriaaremet:a. theentityhasnotyettransferredanypromisedgoodsorservices tothecustomer;and

b. theentityhasnotyetreceived,andisnotyetentitledtoreceive,anyconsiderationinexchangeforpromisedgoodsorservices.(IFRS15.12)

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Ifacontractwithacustomermeetsthecriteria inIFRS15.9(i.e. contractcriteria)atcontractinception, anentityshallnotreassessthosecriteria unless thereisanindicationofa

significantchangeinfactsandcircumstances.(IFRS15.13)

Ifacontractwithacustomerdoesnotmeetthecriteria inIFRS15.9(i.e.contractcriteria), anentityshallcontinuetoassess thecontracttodeterminewhetherthe

criteriainIFRS15.9aresubsequentlymet.(IFRS15.14)


Step1:IdentifytheContract(s)Example

Ifacustomersabilitytopay theconsiderationdeterioratessignificantly, anentitywouldreassess whetheritisprobable

thattheentitywillcollecttheconsiderationtowhichtheentitywillbeentitledinexchangefortheremaininggoodsorservicesthatwillbetransferredtothecustomer.(IFRS15.13)

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WhenacontractwithacustomerdoesnotmeetthecriteriainIFRS15.9andanentityreceivesconsiderationfromthecustomer, theentityshallrecognisetheconsiderationreceivedasrevenueonlywhen

either ofthefollowingeventshasoccurred:a. theentityhasnoremainingobligationstotransfergoodsorservices to

thecustomerandall,orsubstantiallyall,oftheconsiderationpromisedbythecustomerhasbeenreceivedbytheentityandisnonrefundable;or

b. thecontracthasbeenterminated andtheconsiderationreceivedfromthecustomerisnonrefundable.(IFRS15.15)



Anentityshallrecognisetheconsiderationreceived fromacustomerasaliability untiloneoftheeventsinIFRS15.15occurs(assetoutinlastslide),or untilthecriteriainIFRS15.9aresubsequentlymet(seeIFRS15.14,i.e.

continuetoassessthecontractupsubsequentlymet).

Dependingonthefactsandcircumstancesrelatingtothecontract, theliabilityrecognisedrepresentstheentitysobligationtoeither

transfergoodsorservicesinthefutureor refundtheconsiderationreceived.

Ineithercase,theliabilityshallbemeasuredattheamountofconsiderationreceivedfromthecustomer.(IFRS15.16)

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Obligations



Step2:IdentifyPerformanceObligations


Step2:IdentifyingthePerformanceObligationsintheContract Acontractincludespromisestotransfergoods

orservicestoacustomer. Ifthosegoodsorservicesaredistinct,the

promises areperformanceobligations and areaccountedforseparately

Agoodorserviceisdistinct if thecustomercanbenefit fromthegoodorservice

onitsownortogetherwithotherresourcesthatarereadilyavailabletothecustomerand

theentityspromisetotransferthegoodorservicetothecustomerisseparatelyidentifiablefromotherpromisesinthecontract.(IFRS15.IN7)

Performanceobligations

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Atcontractinception,anentityshall assessthegoodsorservicespromised inacontractwithacustomer,and identifyasaperformanceobligation eachpromisetotransfer tothe

customereither:a. agoodorservice (orabundleofgoodsorservices)thatisdistinct;orb. aseriesofdistinctgoodsorservices thataresubstantiallythesame

andthathavethesamepatternoftransfertothecustomer(seeIFRS15.23)(IFRS15.22)

PerformanceobligationsIFRS15definesperformanceobligation as: Apromiseinacontractwithacustomertotransfertothe

customereither:a. agoodorservice(orabundleofgoodsorservices)thatisdistinct;orb. aseriesofdistinctgoodsorservicesthataresubstantiallythesame

andthathavethesamepatternoftransfertothecustomer.



Aseriesofdistinctgoodsorserviceshasthesamepatternoftransfertothecustomerifboth ofthefollowingcriteriaaremet:a. eachdistinctgoodorserviceintheseriesthattheentitypromisesto

transfertothecustomerwouldmeetthecriteriainIFRS15.35tobeaperformanceobligationsatisfiedovertime;and

b. inaccordancewithIFRS15.3940,thesamemethod wouldbeusedtomeasuretheentitysprogress towardscompletesatisfactionoftheperformanceobligation totransfereachdistinctgoodorserviceintheseriestothecustomer.(IFRS15.23)


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Step2:IdentifyPerformanceObligationsExample


Dependingonthecontract,promisedgoodsorservicesmayinclude,butarenotlimitedto,thefollowing:a. saleofgoodsproducedbyanentity(e.g.inventoryofamanufacturer);b. resaleofgoodspurchasedbyanentity(e.g.merchandiseofaretailer);c. resaleofrightstogoodsorservicespurchasedbyanentity(e.g.aticket

resoldbyanentityactingasaprincipal,asdescribedinIFRS15.B34B38);

d. performingacontractuallyagreedupontask(ortasks)foracustomer;e. providingaserviceofstandingreadytoprovidegoodsorservices(e.g.

unspecifiedupdatestosoftwarethatareprovidedonawhenandifavailablebasis)orofmakinggoodsorservicesavailableforacustomertouseasandwhenthecustomerdecides;

f. providingaserviceofarrangingforanotherpartytotransfergoodsorservicestoacustomer(e.g.actingasanagentofanotherparty,asdescribedinIFRS15.B34B38);




Dependingonthecontract,promisedgoodsorservicesmayinclude,butarenotlimitedto,thefollowing:g. grantingrightstogoodsorservicestobeprovidedinthefuturethata

customercanresellorprovidetoitscustomer(forexample,anentitysellingaproducttoaretailerpromisestotransferanadditionalgoodorservicetoanindividualwhopurchasestheproductfromtheretailer);

h. constructing,manufacturingordevelopinganassetonbehalfofacustomer;

i. grantinglicences(seeIFRS15.B52B63);andj. grantingoptionstopurchaseadditionalgoodsorservices(whenthose

optionsprovideacustomerwithamaterialright,asdescribedinIFRS15.B39B43).(IFRS15.26)

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Agoodorservicethatispromisedtoacustomerisdistinct ifbothofthefollowingcriteriaaremet:a. thecustomercanbenefitfromthegoodorservice eitheronitsownor

togetherwithotherresourcesthatarereadilyavailabletothecustomer(i.e.thegoodorserviceiscapableofbeingdistinct);and

b. theentityspromisetotransferthegoodorservicetothecustomerisseparatelyidentifiablefromotherpromises inthecontract(i.e.thegoodorserviceisdistinctwithinthecontextofthecontract).(IFRS15.27)





Factorsthatindicatethatanentityspromisetotransferagoodorservicetoacustomerisseparatelyidentifiable include(butnotlimitedto):a. theentitydoesnotprovideasignificantserviceofintegratingthegoodor

servicewithothergoodsorservicespromisedinthecontract intoabundleofgoodsorservicesthatrepresentthecombinedoutputforwhichthecustomerhascontracted.Inotherwords,theentityisnotusingthegoodorserviceasaninputtoproduceordeliverthecombinedoutputspecifiedbythecustomer.

b. thegoodorservicedoesnotsignificantlymodifyorcustomiseanothergoodorservicepromisedinthecontract.

c. thegoodorserviceisnothighlydependenton,orhighlyinterrelatedwith,othergoodsorservicespromisedinthecontract. Forexample,thefactthatacustomercoulddecidetonotpurchase

thegoodorservicewithoutsignificantlyaffectingtheotherpromisedgoodsorservicesinthecontractmightindicatethatthegoodorserviceisnothighlydependenton,orhighlyinterrelatedwith,thoseotherpromisedgoodsorservices.(IFRS15.29)

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Ifapromisedgoodorserviceisnotdistinct, anentityshallcombine thatgoodorservicewithotherpromisedgoodsor

servicesuntilitidentifies abundleofgoodsorservicesthatisdistinct. Insomecases,thatwouldresultintheentityaccountingforallthegoodsorservicespromised inacontractasasingleperformanceobligation.(IFRS15.30)








Obligations


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D.Measurement



Obligations

Step3:DeterminingtheTransactionPrices Variableconsideration Theexistenceofasignificantfinancing

componentinthecontract Noncashconsideration Considerationpayabletoacustomer

Step4:AllocatingtheTransactionPricetoPerformanceObligations Allocationbasedonstandalonesellingprices Allocationofadiscount Allocationofvariableconsideration Changesinthetransactionprice


Step3:DetermineTransactionPrice


Step3:DeterminingtheTransactionPrices Thetransactionprice

istheamountofconsiderationinacontracttowhichanentityexpectstobeentitled inexchangefortransferringpromisedgoodsorservicestoacustomer

canbeafixedamountofcustomerconsideration,butitmaysometimesinclude variableconsiderationor considerationinaformotherthancash

isalsoadjustedfortheeffectsofthetimevalueofmoney ifthecontractincludesasignificantfinancingcomponentandforanyconsiderationpayabletothecustomer.(IFRS15.IN7)

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Step3:DeterminingtheTransactionPrices Iftheconsiderationisvariable,anentity

estimates theamountofconsiderationtowhichitwillbeentitledinexchangeforthepromisedgoodsorservices.

Theestimatedamountofvariableconsiderationwillbeincludedinthetransactionprice onlytotheextentthatitishighlyprobable

thatasignificantreversal intheamountofcumulativerevenuerecognisedwillnotoccur whentheuncertaintyassociatedwiththevariableconsiderationissubsequentlyresolved.(IFRS15.IN7)



Todeterminethetransactionprice,anentityshallconsider theterms ofthecontract and itscustomarybusinesspractices.

Theconsiderationpromisedinacontractwithacustomermayinclude fixedamounts, variableamounts,or both.(IFRS15.47)

IFRS15definestransactionprice as: Theamountofconsiderationtowhichanentity

expectstobeentitledinexchangefortransferringpromisedgoodsorservicestoacustomer,excludingamountscollectedonbehalfofthirdparties(forexample,somesalestaxes).

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Thenature,timing andamount ofconsiderationpromisedbyacustomeraffecttheestimateofthetransactionprice.

Whendeterminingthetransactionprice,anentityshallconsidertheeffectsofallofthefollowing:a. variableconsideration (seeIFRS15.5055and59);b. constrainingestimates ofvariableconsideration

(seeIFRS15.5658);c. theexistenceofasignificantfinancingcomponent

inthecontract(seeIFRS15.6065);d. noncashconsideration (seeIFRS15.6669);ande. considerationpayabletoacustomer

(seeIFRS15.7072).(IFRS15.48)

VariableConsideration

ConstrainingEstimatesofVariableCon.

SignificantFinancingComponentNoncash

ConsiderationConsiderationPayable

toCustomer



Forthepurposeofdeterminingthetransactionprice,anentityshallassume that thegoodsorserviceswillbetransferred tothe

customeraspromisedinaccordancewiththeexistingcontractand

thecontractwillnotbecancelled,renewedormodified.(IFRS15.49)


ConstrainingEstimatesofVariableCon.

SignificantFinancingComponentNoncash

ConsiderationConsiderationPayable

toCustomer

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Iftheconsiderationpromisedinacontractincludesavariableamount, anentityshallestimatetheamountofconsiderationtowhichtheentity

willbeentitledinexchangefortransferringthepromisedgoodsorservicestoacustomer.(IFRS15.50)



Step3:DetermineTransactionPrice Anentityshallestimate anamountofvariableconsiderationbyusingeither

ofthefollowingmethods,dependingonwhichmethodtheentityexpectstobetterpredicttheamountofconsideration towhichitwillbeentitled:a. Theexpectedvalue theexpectedvalueisthesumofprobability

weightedamounts inarangeofpossibleconsiderationamounts. Anexpectedvaluemaybeanappropriateestimateoftheamountof

variableconsiderationifanentityhasalargeno.ofcontractswithsimilarcharacteristics.

b. Themostlikelyamount themostlikelyamountisthesinglemostlikelyamountinarangeofpossibleconsiderationamounts (i.e.thesinglemostlikelyoutcomeofthecontract). Themostlikelyamountmaybeanappropriate

estimateoftheamountofvariableconsiderationifthecontracthasonlytwopossibleoutcomes (e.g.anentityeitherachievesaperformancebonusordoesnot).(IFRS15.53)


ExpectedValue

MostLikelyAmount

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Obligations



Step4:AllocateTransactionPricetoPO


Obligations

Step4:AllocatingtheTransactionPricetoPerformanceObligations Anentitytypicallyallocatesthetransaction

pricetoeachperformanceobligationonthebasisoftherelativestandalonesellingpricesofeachdistinctgoodorservicepromised inthecontract. Ifastandalonesellingpriceisnotobservable,an

entityestimatesit. Sometimes,thetransactionpriceincludesa

discountoravariableamountofconsiderationthatrelatesentirelytoapartofthecontract. IFRS15specifywhenanentityallocatesthe

discountorvariableconsiderationtooneormore,butnotall,performanceobligations(ordistinctgoodsorservices)inthecontract.(IFRS15.IN7)

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Theobjectivewhenallocatingthetransactionprice is foranentitytoallocatethetransactionpriceto

eachperformanceobligation (ordistinctgoodorservice)inanamountthatdepictstheamountofconsideration towhichtheentityexpectstobeentitledinexchangefortransferringthepromisedgoodsorservicestothecustomer.(IFRS15.73)


Obligations

BasedonStandaloneSellingPrice(SASP)Allocationofa

DiscountAllocationofVariable

Consideration



Tomeettheallocationobjective,anentityshallallocatethetransactionpricetoeachperformanceobligationidentifiedinthecontractonarelativestandalonesellingpricebasis inaccordancewithIFRS15.7680,exceptasspecifiedin IFRS15.8183(forallocatingdiscounts)and IFRS15.8486(forallocating

considerationthatincludesvariableamounts).(IFRS15.74)



Consideration


Obligations

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IFRS15.7686donotapply ifacontracthasonlyoneperformance

obligation. However,IFRS15.8486mayapply

ifanentitypromisestotransferaseriesofdistinctgoodsorservices identifiedasasingleperformanceobligation inaccordancewithIFRS15.22(b)and

thepromisedconsiderationincludesvariableamounts.(IFRS15.75)



Consideration


Obligations







Obligations


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Step5:SatisfyPerformanceObligations


Step5:Satisfactionofperformanceobligations Aanentityrecognisesrevenuewhen(oras)it

satisfiesaperformanceobligation bytransferringapromisedgoodorservicetoacustomer whichiswhenthecustomerobtainscontrol

ofthatgoodorservice. Theamountofrevenuerecognisedisthe

amountallocatedtothesatisfiedperformanceobligation.(IFRS15.IN7)




Step5:Satisfactionofperformanceobligations Aperformanceobligationmaybesatisfied

atapointintime (typicallyforpromisestotransfergoodstoacustomer)or

overtime (typicallyforpromisestotransferservicestoacustomer).

Forperformanceobligationssatisfiedovertime,anentityrecognisesrevenueovertimebyselectinganappropriatemethodformeasuringtheentitysprogress towardscompletesatisfactionofthatperformanceobligation.(IFRS15.IN7)

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Anentityshallrecogniserevenue when(oras)theentitysatisfiesaperformanceobligation bytransferring a

promisedgoodorservice (i.e.anasset)toacustomer.

Anassetistransferred when(oras)thecustomerobtainscontrol ofthatasset(IFRS15.31)



ForeachperformanceobligationidentifiedinaccordancewithIFRS15.2230, anentityshalldetermineatcontractinception whetherit

satisfiestheperformanceobligationovertime(inaccordancewithIFRS15.3537)or

satisfiestheperformanceobligationatapointintime (inaccordancewithIFRS15.38). Ifanentitydoesnotsatisfyaperformanceobligationovertime,theperformanceobligationissatisfiedatapointintime.(IFRS15.32)

OverTime

AtaPointinTime

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Goodsandservicesareassets,evenifonlymomentarily,whentheyarereceivedandused(asinthecaseofmanyservices).

Controlofanasset referstotheabilitytodirect theuseof,andobtain

substantiallyalloftheremainingbenefits from,theasset.

includestheabilitytopreventotherentitiesfromdirecting theuseof,andobtainingthebenefitsfrom,anasset.

Whenevaluatingwhetheracustomerobtainscontrolofanasset, anentityshallconsideranyagreement

torepurchasetheasset (seeIFRS15.B64B76).(IFRS15.33)

OverTime

AtaPointinTime



Anentitytransferscontrol ofagoodorserviceovertime and,therefore,satisfiesaperformanceobligationandrecognisesrevenueovertime,ifone ofthefollowingcriteriaismet:a. thecustomersimultaneouslyreceivesandconsumes

thebenefits providedbytheentitysperformanceastheentityperforms(seeIFRS15.B3B4);

b. theentitysperformancecreatesorenhancesanasset (e.g.workinprogress)thatthecustomercontrols astheassetiscreatedorenhanced(seeIFRS15.B5);or

c. theentitysperformancedoesnotcreateanassetwithanalternativeusetotheentity (seeIFRS15.36)andtheentityhasanenforceablerighttopaymentforperformancecompletedtodate (seeIFRS15.37).(IFRS15.35)

OverTime

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Ifaperformanceobligationisnotsatisfiedovertime inaccordancewithIFRS15.3537,anentitysatisfiestheperformanceobligationatapointintime.

Todeterminethepointintimeatwhichacustomerobtainscontrol ofapromisedassetandtheentitysatisfiesaperformanceobligation, theentityshallconsidertherequirementsfor

control inIFRS15.3134.(IFRS15.38)

AtaPointinTime

OverTime



MeasuringProgressTowardsCompleteSatisfactionofaPerformanceObligation Foreachperformanceobligationsatisfiedovertime

inaccordancewithIFRS15.3537, anentityshallrecogniserevenueovertime bymeasuringtheprogresstowardscompletesatisfactionofthatperformanceobligation.

Theobjectivewhenmeasuringprogressistodepictanentitysperformanceintransferringcontrolofgoodsorservicespromised toacustomer(i.e.thesatisfactionofanentitysperformanceobligation).(IFRS15.39)

OverTime

MeasuringProgress

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MeasuringProgressTowardsCompleteSatisfactionofaPerformanceObligation Anentityshallapplyasinglemethodofmeasuring

progressforeachperformanceobligation satisfiedovertimeandtheentityshallapplythatmethodconsistentlytosimilarperformanceobligationsandinsimilarcircumstances.

Attheendofeachreportingperiod, anentityshallremeasure itsprogresstowardscompletesatisfactionofaperformanceobligation satisfiedovertime.(IFRS15.40)

OverTime

MeasuringProgress



MethodsforMeasuringProgress Appropriatemethodsofmeasuringprogressinclude

outputmethods andinputmethods (IFRS15.B14B19provideguidance)

Indeterminingtheappropriatemethodformeasuringprogress,anentityshallconsiderthenatureofthegoodorservice thattheentitypromisedtotransfertothecustomer.(IFRS15.41)

Whenapplyingamethodformeasuringprogress,anentityshallexcludefromthemeasureofprogress anygoodsorservicesforwhichtheentitydoesnottransfercontroltoacustomer.

Conversely,anentityshallincludeinthemeasureofprogress anygoodsorservicesforwhichtheentitydoestransfercontroltoacustomer whensatisfyingthatperformanceobligation.(IFRS15.42)

OverTime

MeasuringProgress

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Obligations


When(oras)aperformanceobligationissatisfied, anentityshallrecogniseasrevenue

theamountofthetransactionprice(whichexcludesestimatesofvariableconsiderationthatareconstrained inaccordancewithIFRS15.5658)thatisallocatedtothatperformanceobligation.(IFRS15.46)


ContractCosts,Presentation&Discl.





Obligations


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E.ContractCosts

IncrementalCostsofObtainingaContract Anentityshallrecogniseasanasset theincrementalcostsofobtaininga

contract withacustomeriftheentityexpectstorecoverthosecosts.(IFRS15.91) Theincrementalcostsofobtainingacontractarethosecoststhatanentityincurstoobtainacontractwithacustomerthatitwouldnothaveincurredifthecontracthadnotbeenobtained(e.g.asalescommission).(IFRS15.92)

Coststoobtainacontractthatwouldhavebeenincurredregardlessofwhetherthecontractwasobtainedshallberecognisedasanexpensewhenincurred,unlessthosecostsareexplicitlychargeabletothecustomerregardlessofwhetherthecontractisobtained.(IFRS15.93)

Asapracticalexpedient,anentitymayrecognisetheincrementalcostsofobtainingacontractasanexpensewhenincurred iftheamortisationperiodoftheassetthattheentityotherwisewouldhaverecognisedisoneyearorless.(IFRS15.94)


E.ContractCosts

CoststoFulfilaContract Ifthecostsincurredinfulfillingacontractwithacustomerarenotwithin

thescopeofanotherStandard(e.g.IAS2,IAS16orIAS38),anentityshallrecogniseanassetfromthecostsincurredtofulfilacontract onlyifthosecostsmeetall ofthefollowingcriteria:a. thecostsrelatedirectlytoacontractortoananticipatedcontractthat

theentitycanspecificallyidentify (e.g.costsrelatingtoservicestobeprovidedunderrenewalofanexistingcontractorcostsofdesigninganassettobetransferredunderaspecificcontractthathasnotyetbeenapproved);

b. thecostsgenerateorenhanceresources oftheentitythatwillbeusedinsatisfying(orincontinuingtosatisfy)performanceobligations inthefuture;and

c. thecostsareexpectedtoberecovered.(IFRS15.95)

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E.ContractCosts

ForcostsincurredinfulfillingacontractwithacustomerthatarewithinthescopeofanotherStandard, anentityshallaccountforthosecostsinaccordancewiththoseotherStandards.(IFRS15.96)

CoststoFulfilaContract


E.ContractCostsExample

Coststhatrelatedirectlytoacontract(oraspecificanticipatedcontract)includeanyofthefollowing:a. directlabour (forexample,salariesandwagesofemployeeswho

providethepromisedservicesdirectlytothecustomer);b. directmaterials (forexample,suppliesusedinprovidingthepromised

servicestoacustomer);c. allocations ofcoststhatrelatedirectlytothecontractortocontract

activities (forexample,costsofcontractmanagementandsupervision,insuranceanddepreciationoftoolsandequipmentusedinfulfillingthecontract);

d. coststhatareexplicitlychargeabletothecustomerunderthecontract;and

e. othercoststhatareincurredonlybecauseanentityenteredintothecontract (forexample,paymentstosubcontractors).(IFRS15.97)

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E.ContractCostsExample

Anentityshallrecognisethefollowingcostsasexpenseswhenincurred:a. generalandadministrativecosts (unlessthosecostsareexplicitly

chargeabletothecustomerunderthecontract,inwhichcaseanentityshallevaluatethosecostsinaccordancewithIFRS15.97);

b. costsofwasted materials,labourorotherresourcestofulfilthecontractthatwerenotreflectedinthepriceofthecontract;

c. coststhatrelatetosatisfiedperformanceobligations (orpartiallysatisfiedperformanceobligations)inthecontract(i.e.coststhatrelatetopastperformance);and

d. costsforwhichanentitycannotdistinguish whetherthecostsrelateto tounsatisfiedperformanceobligationsor tosatisfiedperformanceobligations(orpartiallysatisfied

performanceobligations).(IFRS15.98)


E.ContractCosts

AmortisationandImpairment AnassetrecognisedinaccordancewithIFRS15.91or95shallbeamortised

onasystematicbasis thatisconsistentwiththetransfertothecustomerofthegoodsorservicestowhichtheassetrelates.

Theassetmayrelatetogoodsorservicestobetransferredunderaspecificanticipatedcontract(asdescribedinIFRS15.95(a)).(IFRS15.99)

Anentityshallupdatetheamortisation toreflectasignificantchangeintheentitysexpectedtimingoftransfer tothecustomerofthegoodsorservicestowhichtheassetrelates. SuchachangeshallbeaccountedforasachangeinaccountingestimateinaccordancewithIAS8.(IFRS15.100)

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E.ContractCosts

Anentityshallrecogniseanimpairmentlossinprofitorloss totheextentthatthecarryingamountofanassetrecognisedinaccordancewithIFRS15.91or95exceeds:a. theremainingamountofconsideration thattheentityexpectsto

receiveinexchangeforthegoodsorservicestowhichtheassetrelates;less

b. thecosts thatrelatedirectly toprovidingthosegoodsorservicesandthathavenotbeenrecognisedasexpenses(seeIFRS15.97).(IFRS15.101)

AmortisationandImpairment


F.Presentation

Wheneitherpartytoacontracthasperformed, anentityshallpresentthecontract inthestatementoffinancialposition

asacontractassetoracontractliability,dependingontherelationshipbetweentheentitysperformanceandthecustomerspayment.

Anentityshallpresentanyunconditionalrightstoconsiderationseparatelyasareceivable.(IFRS15.105)

Ifacustomerpaysconsideration,oranentityhasarighttoanamountofconsiderationthatisunconditional(i.e.areceivable),beforetheentitytransfersagoodorservicetothecustomer, theentityshallpresentthecontractasacontractliability whenthe

paymentismadeorthepaymentisdue(whicheverisearlier). Acontractliabilityisanentitysobligationtotransfergoodsorservices

toacustomerforwhichtheentityhasreceivedconsideration(oranamountofconsiderationisdue)fromthecustomer.(IFRS15.106)

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F.Presentation

Ifanentityperformsbytransferringgoodsorservicestoacustomerbeforethecustomerpaysconsiderationorbeforepaymentisdue, theentityshallpresentthecontractasacontractasset,excludingany

amountspresentedasareceivable. Acontractassetisanentitysrighttoconsiderationinexchangefor

goodsorservicesthattheentityhastransferredtoacustomer.

AnentityshallassessacontractassetforimpairmentinaccordancewithIFRS9. Animpairmentofacontractassetshallbemeasured,presentedand

disclosedonthesamebasisasafinancialassetthatiswithinthescopeofIFRS9(seealsoIFRS15.113(b)).(IFRS15.107)


G.Disclosure

Theobjectiveofthedisclosurerequirementsis foranentitytodisclosesufficientinformationtoenableusersoffinancial

statementstounderstandthenature,amount,timinganduncertaintyofrevenueandcashflowsarisingfromcontractswithcustomers.

Toachievethatobjective,anentityshalldisclosequalitativeandquantitativeinformation aboutallofthefollowing:a. itscontracts withcustomers(seeIFRS15.113122);b. thesignificantjudgements,andchangesinthejudgements,madein

applyingIFRS15tothosecontracts(seeIFRS15.123126);andc. anyassetsrecognisedfromthecoststoobtainorfulfilacontract witha

customerinaccordancewithIFRS15.91orIFRS15.95(seeIFRS15.127128).(IFRS15.109)

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