IFRS Accounting decisions | Annualreporting.info

Distinct goods or services

Why do we need to know whether a good or service is distinct?

Cambridge dictionary definition: Distinct means clearly noticeable – that clearly exists, and an adjective at the same definition that is very useful to IFRS 15:  clearly separate and different (from something else).

So a first clarification is: Distinct goods or services = Goods or services that are clearly separate and different from each other.

Some variations resulting from this:

Good(s) clearly separate and different from (an)other good(s), Good(s) clearly separate and different from a service, Service(s) clearly separate and different from (an)other service(s).

So now we are up to the more IFRS-ish language on how to decide whether or NOT a service or a good is distinct –  Read more

Series requirement

This is part of ‘Determining when promises are performance obligations?’

Series of distinct goods and/or services that are substantially the same and have the same pattern of transfer are combined or represent one performance indicator.  Determining when promises are performance obligations

IFRS 15 22(b) defines, as a second type of performance obligation, a promise to transfer to the customer a series of distinct goods or services that are substantially the same and that have the same pattern of transfer, if both of the following criteria from IFRS 15 23 are met: Series requirement

  • Each distinct good or service in the series that the entity promises to transfer represents a performance obligation that would be satisfied over time,
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Contract costs

IFRS 15 specifies the accounting treatment for costs an entity incurs to obtain and fulfil a contract to provide goods or services to customers as discussed below. An entity only applies these requirements to costs incurred that relate to a contract with a customer that is within the scope of IFRS 15.

When an entity recognises capitalised contract costs under IFRS 15, any such assets must be presented separately from contract assets and contract liabilities in the statement of financial position or disclosed separately in the notes to the financial statements (assuming they are material).Contract costs Contract costs

Furthermore, entities must consider the requirements in IAS 1 on classification of current assets when determining whether their contract cost assets are presented as … Read more

Royalty income intellectual property

IFRS 15 provides application guidance on the recognition of revenue for sales-based or usage-based royalties on licences of intellectual property, which differs from the requirements that apply to other revenue from licences.

IFRS 15 B63 requires that royalties received in exchange for licences of intellectual property are recognised at the later of when:Royalty income intellectual property

(a) The subsequent sale or usage occurs.


(b) The performance obligation to which some or all of the sales-based or usage-based royalty has been allocated is satisfied (or partially satisfied).

That is, an entity recognises the royalties as revenue for such arrangements when (or as) the customer’s subsequent sales or usage occurs, unless that pattern of recognition accelerates revenue recognition ahead of the entity’s … Read more

Satisfaction of performance obligations

This is a primary and fundamental subject in the recognition of revenue. There are two ways of recognising revenue, revenue recognition over time and revenue recognition at a point in time. Revenue recognition over time is often referred to as the ‘Percentage of completion‘ method under the (superseded) IAS 11 Construction contracts.

The general principle is the revenue is recognised at a point in time (and as such it is the most common type of sales transaction at least in volume, just think of: a retailer sells a candy bar for cash in the shopping mall). As a result there are three criterion (see below ability, direct the use and obtain benefits from) that have to be … Read more

Consideration paid or payable to a customer

Many entities make payments to their customers. In some cases, the consideration paid or payable represents purchases by the entity of goods or services offered by the customer that satisfy a business need of the entity. In other cases, the consideration paid or payable represents incentives given by the entity to entice the customer to purchase, or continue purchasing, its goods or services. [IFRS 15 70 – 72]

The following decision tree illustrates these requirements:

Consideration paid or payable to a customer


Document your decisions in your financial close file to facilitate internal

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