Licensing

Licensing establishes a customer’s rights to the intellectual property of an entity. Licenses of intellectual property may include, but are not limited to, licenses of any of the following:

  1. Software (other than software subject to a hosting arrangement) and technology
  2. Motion pictures, music, and other forms of media and entertainment
  3. Franchises
  4. Patents, trademarks, and copyrights.

In addition to a promise to grant a license (or licenses) to a customer, an entity may also promise to transfer other goods or Continue reading

Repurchase options and residual value guarantees

OEMs may sell vehicles with a repurchase option or a residual value guarantee (e.g., when they sell fleets to rental car companies). Under a residual value guarantee, OEMs agree to compensate the customer (‘make whole’) for the difference between the resale price the customer obtains in an open market and the guaranteed minimum resale value.

Under IFRS 15, arrangements with repurchase features must be evaluated to determine whether they represent a sale, lease or financing, based on specified criteria. This … Continue reading

Long-term supply contracts

To apply IFRS 15, automotive parts suppliers (APSs) will need to change the way they evaluate long-term supply contracts. APSs need to use significant judgement when they identify separate performance obligations (i.e., units of account), which may be different from those identified under IAS 18.

Tooling equipment

APSs commonly enter into long-term arrangements with OEMs to provide specific parts, such as seat belts or steering wheels. An arrangement typically includes the construction for the tooling, which is required to … Continue reading

Dealer sales vehicle incentives

To apply IFRS 15, original equipment manufacturers (OEMs) will need to change the way they evaluate incentives. OEMs need to use significant judgement when they identify separate performance obligations (i.e., units of account), which may be different from those identified under IAS 18.

OEMs frequently offer sales incentives in contracts to sell vehicles to dealers. These sales incentives may be cash rebate bonuses or another type of incentive available to dealers and retail customers (who purchase the vehicle … Continue reading

Performance obligations in software and cloud services contracts

Once an entity has identified the contract with a customer, it evaluates the contractual terms and its customary business practices to identify all the promised goods or services within the contract and determine which of those promised goods or services (or bundles of promised goods or services) will be treated as separate performance obligations.

Promised goods and services represent separate performance obligations if they are:

Distinct (by themselves or as part of a bundle of goods and services)Continue reading

Construction warranties

This part relates to a complete explanation of IFRS 15 Revenue from contracts with customers in respect of Engineering & Construction contracts, see https://annualreporting.info/revenue-from-engineering-construction-contracts/.


Warranties are commonly included in contracts to sell goods or services, whether explicitly stated or implied based on the entity’s customary business practices. The standard identifies two types of warranties:

  • Warranties that promise the customer that the delivered product is as specified in the contract are called ’assurance-type warranties’. The Boards concluded that assurance-type

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Extra disclosures IFRS 15

This part relates to a complete explanation of IFRS 15 Revenue from contracts with customers in respect of Engineering & Construction contracts, see https://annualreporting.info/revenue-from-engineering-construction-contracts/.


Contract balances

The disclosures related to contract balances are extensive and intended to enable users to understand the relationship between the revenue recognised and changes in overall balances of total contract assets and liabilities in a particular reporting period.

For example, disclosures required include revenue recognised in the reporting period that was included in … Continue reading

Disaggregation of revenue

This part relates to a complete explanation of IFRS 15 Revenue from contracts with customers in respect of Engineering & Construction contracts, see https://annualreporting.info/revenue-from-engineering-construction-contracts/.


The disclosure requirements include revenue disaggregated into categories to illustrate how the nature, amount, timing and uncertainty about revenue and cash flows are affected by economic factors. While the standard does not specify precisely how revenue is required to be disaggregated, the application guidance suggests categories, as follows:

  • Type of good or service (e.g.,
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Contract assets and contract liabilities

This part relates to a complete explanation of IFRS 15 Revenue from contracts with customers in respect of Engineering & Construction contracts, see https://annualreporting.info/revenue-from-engineering-construction-contracts/.


IAS 11 required entities to record assets for unbilled accounts receivable when revenue is recognised but not billed. Once the invoice is submitted to the customer, the unbilled receivable is reclassified as a billed accounts receivable.

Similarly, billings in excess of costs are generally recognised as liabilities. IFRS 15 is based on the … Continue reading

Onerous contracts

This part relates to a complete explanation of IFRS 15 Revenue from contracts with customers in respect of Engineering & Construction contracts, see https://annualreporting.info/revenue-from-engineering-construction-contracts/.


The requirements in IAS 37 for onerous contracts apply to all contracts in the scope of IFRS 15. IFRS 15 states that entities that are required to recognise a liability for expected losses on contracts under IAS 37 will continue to be required to do so. IAS 37 requirements for onerous contracts are described … Continue reading