IFRS 15 Revenue from contacts with customers

    Cards (16)

    • IFRS 15 - objective of that standard

      Revenue figure needs to be reliable so – when should revenue by recognised? How should it be measured
    • Revenue definition excludes
      • borrowings - since they increase liabilities not equity
      • amounts contributed by shareholders (eg share issues)
      • gains (revaluation gains and gains arising on the disposal of assets)
    • revenue recognition criteria
      • when it represents the transfer or goods customer
      • based on the transfer of control over services
      • contract to transfer goods/ services represents a promise to a performance obligation under standard
    • the 5 step model
      1. identify the contract with the customer
      2. identify the separate performance obligations
      3. determine the transaction price
      4. allocate the transaction price to the perfjoamcne obligations
      5. recognise the revenue when a performance obligation is satisfied
      1. identify the contract with customer
      • contract approved
      • parties committed
      • parties rights can be identified
      • cash flows will result from transaction
      • probable collection of consideration
    • contract modification
      treated separate if:
      • distinct goods/ services are added
      • contract price increase reflect a 'stand alone' value
    • combining of contracts

      only if:
      • negotiated as a package
      • considerations interdependent
      • single performance obligation
    • 2. identify the separate obligations
      • obligation to supply 'distinct goods or services'
      • the revenue for each 'distinct' obligation is accounted for separately
    • 3.  Determine the transaction price 
      ·       Expected value (weighted average based on profitability) 
      ·       Most likely amount (single most likely outcome – may suitable if only two possible outcomes)
    • 5. recognise revenue when (or as) a performance obligation is satisfied
      • revenue recognised as obligation satisfied either - at a point in time/ over a period of time
    • when has performance obligation been satisfied?
      • the entity has a right to payment
      • the customer has legal total to the assets
      • the customer has taken possession of the asset
      • risks and rewards have been transferred
      • the customer has accepted the asset
    • performance obligation calculations
      output methods (surveys of completed work)
      • works certified/ contract price x estimate total revenues
      • works certified/ contract price x estimated total costs
      input methods (costs incurred/ labour hours)
      • costs to date/ total estimated costs x estimated total revenues
      • costs to date/ total estimate costs x estimated total costs
    • disclosure
      the disaggregation of the revenue into appropriate categories
      • opening and closing balance of receivables, contract assets and contract liabilities
      • revenue recognised in the reporting period that was included int the contract liabilities opening balance
      • revenue recognised in the reporting period from performance obligations satisfied in previous periods
    • For performance obligations, a description of: 
      ·       When the company typically satisfies its performance obligations
      ·       The significant payment terms
      ·       The nature of the goods or services that the entity has promised to transfer
      ·       Obligations for returns, refunds and other similar obligations
      ·       Types of warranties and related obligations
    • significant judgements, and changes in judgements
      • The timing of satisfaction of performance obligations
      • The transaction price and the amounts allocated to performance obligations
    • assets recognised from the costs to obtain or fulfil a contract with a customer, including
      • A description of the judgements made in determining the amount of the costs and the amortisation method used for each reporting period
      • The closing balances of the assets
      • The amount of amortisation and any impairment losses recognised in the reporting period 
       
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