Performance obligations construction industry

A construction contract may, in theory, be broken down into many promises that may need to be accounted for separately, the performance obligations construction industry. However, the contract for the construction service can continue to be accounted for as one performance obligation if the contractor can demonstrate that: Performance obligations construction industry

  • it will provide a significant integration service; Performance obligations construction industry Construction industry performance obligations
  • the goods or services significantly modify or customise other goods or services promised in the contract; or
  • the goods and services within the contract are highly dependent on or integrated with other goods or services i.e. not distinct. Performance obligations construction industry

Given the integrated nature of contracting activities and that goods and services within the contract … Read more

The perfect 5 step-by-step revenue model

The perfect 5 step-by-step revenue model -IFRS 15 Revenue from Contracts with Customers was issued on 28 May 2014. It supersedes:

  • IAS 18 Revenue; The perfect 5 step-by-step revenue model
  • IAS 11 Construction contracts; The perfect 5 step-by-step revenue model
  • IFRIC 13 Customer Loyalty Programmes; The perfect 5 step-by-step revenue model
  • IFRIC 15 Agreements for the Construction of Real Estate; The perfect 5 step-by-step revenue model
  • IFRIC 18 Transfers of Assets from Customers; and The perfect 5 step-by-step revenue model
  • SIC-31 Revenue – Barter Transactions Involving Advertising Services. The perfect 5 step-by-step revenue model

IFRS 15 will improve comparability of reported revenue over a range of industries, companies and geographical areas globally.

IFRS 15’s objective is to establish principles that … Read more

IFRS 15 Software contract modifications

IFRS 15 Software contract modifications – It is common in the software industry to change the scope or price of the contract. For example, a vendor may license software and provide post-contract customer support (PCS) to a customer in an initial transaction and then license additional software to the same customer at a later time. In general, any change to an existing contract is a modification per the guidance when the parties to the contract approve the modification either in writing, orally, or based on the parties’ customary business practices. A new contract entered into with an existing customer could also be viewed as the modification of an existing contract, depending on the circumstances.

In determining whether a contract has … Read more

IFRS 15 Best and improved revenue for Telecoms

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IFRS 15 Best and improved revenue for Telecoms – Setting the stage – the services in the market and distributors

The communications industry comprises several sub-sectors, including wireless, fixed line, and cable/satellite television (TV). These companies generate revenue through many different service offerings that include access to, and usage of, network and facilities for the provision of voice, data, internet, and television services.

These services generate revenues through subscription fees or usage charges. Some communications companies also sell or lease equipment such as handsets, modems, dongles (a w IFRS 15 Best and improved revenue for Telecoms ireless broadband service connector), customer premises equipment (CPE), and a variety of accessories.

Offerings in the communications industry have evolved as a result of consolidation, technology changes and innovation. … Read more

Contract Modifications under IFRS 15

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Contract Modifications under IFRS 15 – Just two practical examples, to better understand all kind of things for IFRS 15.

On 1 January 20X1, Wireless Company enters into a two-year contract with a customer for a 2-gigabyte (GB) data plan with unlimited talk and text for CU60/month and a subsidised handset for which the customer pays CU200. Contract Modifications under IFRS 15

The handset has a stand-alone selling price of CU600. Contract Modifications under IFRS 15

For purposes of this illustration, the time value of money has not been considered, the stand-alone selling price of the wireless plan is assumed to be the same as the contractual price and the effect of the constraint on variable consideration … Read more

A closer look at IFRS 15 the new revenue model

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A closer look at IFRS 15 the new revenue model – IFRS 15 establishes principles that an entity shall apply to report useful information to users of financial statements about the nature, amount, timing and uncertainty of revenue and cash flows arising from a contract with a customer. A closer look at IFRS 15 the new revenue model

The revenue model applies to all contracts with customers except leases, insurance contracts, financial instruments, guarantees and certain non-monetary exchanges. The sale of non-monetary financial assets, such as property, plant and equipment, real estate or intangible assets will also be subject to some of the requirements of IFRS 15.

A contract with a customer may be partially within the … Read more

Stand-alone selling price

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Exact wording: Stand-alone selling price of a good or a service.

The price at which an entity would sell a promised good or service separately to a customer.

The best evidence of standalone selling price is the price that the entity charges for the good or service in a separate transaction with a customer. However, in many cases goods or services are sold exclusively as a package with other goods or services rather than on an individual basis (e.g. non-renewable customer support).  In these cases, the standalone selling price must be estimated. The revenue standard does not prohibit any method for estimating the standalone selling price, as long as the estimation results in an accurate representation of … Read more

IFRS 15 Volume discounts and Margin guarantees

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IFRS 15 Volume discounts and Margin guarantees – Volume discounts

To entice customers to buy/order more goods, it is not uncommon for wholesalers to provide customers with volume discoun IFRS 15 Volume discounts and Margin guarantees ts/rebates. Under IFRS 15, volume discounts/rebates is a type of variable consideration. [IFRS 15 50 – 59] IFRS 15 Volume discounts and Margin guarantees

Wholesalers are to record revenue at the amount it expects to receive (net of discounts/rebates). This means that wholesalers will recognise revenue at the average expected price per unit – by estimating the total expected sales volume and the total sales expected revenue (after deducting discount/rebates). IFRS 15 Volume discounts and Margin guarantees

The case – Volume discounts IFRS 15 Volume discounts Read more

IAS 1 The best and proven breached loan accounting

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IAS 1 The best and proven breached loan accounting – Loan agreements often include covenants that, if breached by the borrower, permit the lender to demand repayment before the loan’s normal maturity date. In response to a borrower’s request, lenders may decide to voluntarily waive some or all of the rights they acquire as a result of a breach.

Relevant IFRSs IAS 1 The best and proven breached loan accounting

IAS 1 Presentation of Financial Statements IAS 1 The best and proven breached loan accounting

IAS 10 Events after the Reporting Period IAS 1 The best and proven breached loan accounting

IFRS 7 Financial Instruments: Disclosures IAS 1 The best and proven breached loan accounting

Condition of the loan

Classification of a long-term loan payable as … Read more

IFRS 15 Software industry obligations

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IFRS 15 Software industry obligations – This is an example in a small series for illustrating the concepts in What is a good or service that is distinct?

Scenario A IFRS 15 Software industry obligations

A vendor enters into a contract with a customer to supply a license for a standard ‘off the shelf’ software package, install the software, and to provide unspecified software updates and technical support for a period of two years. The vendor sells the license and technical support separately, and the installation service is routinely provided by a number of other unrelated vendors. The software will remain functional without the software updates and technical support. IFRS 15 Software industry obligations

The software is … Read more