Revenue recognition at a point in time

Revenue recognition at a point in time is included in IFRS 15 Revenue from Contracts with Customers (contents page is here), that introduced a single and comprehensive framework which sets out how much revenue is to be recognised, and when. The core principle is that a vendor should recognise revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the vendor expects to be entitled in exchange for those goods or services. See a summary of IFRS 15 here. Revenue recognition at a point in time

We can say that performance obligation satisfied at … Read more

IFRS 15 Revenue recognition

IFRS 15 Revenue recognition 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 Revenue recognition over time is often referred to as the ‘Percentage of completion‘ method under the (superseded) IAS 11 Construction contracts.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 … Read more

IFRS 16 Lease term explained

IFRS 16 Lease term explained or the lease term includes the following items (IFRS 16 18):

  • non-cancellable period of a lease; IFRS 16 Lease term explained
  • periods covered by an option to extend the lease – if the lessee (customer) is reasonably certain to exercise that option; and
  • periods covered by an option to terminate the lease – if the lessee (customer) is reasonably certain not to exercise that option.

The lease term should not go beyond the ‘enforceable period’ which lasts up to a point when both parties have the right to terminate the lease without permission from the other party with no more than an insignificant penalty (IFRS 16 B34).

Legal framework in a given country … Read more

IFRS 10 Silos and deemed separate entities

IFRS 10 Silos and deemed separate entities generally require the control assessment to be made at the level of each investee entity. However, in some circumstances the assessment is made for a portion of an entity (a deemed separate entity). This is the case if, and only if, all the assets, liabilities and equity of that part of the investee entity are ring-fenced from the overall investee (often described as a ‘silo’) [IFRS 10 B76 – B79]. IFRS 10 Silos and deemed separate entities

Silos most often exist within special purpose vehicles in the financial services and real estate sectors (for example, ‘multi-seller conduits’ and captive insurance entities). However, the conditions for a silo to be deemed a … Read more

IFRS 10 Cases of no consolidation requirements

This is what this is about: IFRS 10 Cases of no consolidation requirements. This requires all parent entities to present consolidated financial statements, other than: IFRS 10 Cases of no consolidation requirements

  • parent entities that are investment entities (see exception in link). These are an exception to consolidation if they are required (in accordance with IFRS 10 31) to measure all of their subsidiaries at fair value through profit or loss [IFRS 10 4B].

  • intermediate parent entities that meet the strict conditions for exemption, which are set out below:

IFRS 10 Cases of no consolidation requirements

Conditions for a parent entity to be exempt from consolidation [IFRS 10 4]

A parent is not required to present consolidated financial statements if

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Assessment of investment entities

The assessment of investment entities is documenting whether an entity meets the definition, all facts and circumstances should be considered, including the entity’s purpose and design [IFRS 10 B85A]. It will often be straightforward to determine whether an entity is an investment entity. However, in view of the fundamental importance this assessment has on affected entities’ financial statements, IFRS 10 provides extensive application guidance.

More detail on each element of the definition is provided below:

1 Investment services condition

One of the essential activities of an investment entity is that it obtains funds from investors in order to provide those investors with investment management services. This is a feature that distinguishes investment entities and other entities, although … Read more

Accounting by investment entities

Accounting by investment entities is about the accounting requirements in IFRS 10 for investment entities that are limited to an exception from consolidation of investments in certain subsidiaries. The exception also impacts the separate financial statements of an investment entity (if these are prepared). The table summarises the key requirements: Accounting by investment entities



Accounting for subsidiaries held as investments

  • subsidiaries held as investments are measured at fair value through profit or loss in accordance with IFRS 9 instead of being consolidated [IFRS 10 31]. This accounting is mandatory not optional. Voluntary consolidated financial statements that state compliance with IFRS are not permitted
  • IFRS 3 does not apply to the obtaining of control over an exempt
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The way to IFRS 9 Financial Instruments

This is the way to IFRS 9 Financial Instruments, introducing the why? for this new IFRS standard. In July 2014 the International Accounting Standards Board (IASB) published the 4th and final version of IFRS 9 Financial Instruments.

The way to IFRS 9 Financial Instruments

This was the conclusion of a major project started in 2002 as part of the Norwalk Agreement (WIKI) between the IASB and US Financial Accounting Standards Board (FASB) as a long term reform of financial instrument accounting.

The project had been divided into three phases in order to allow a step by step approach. Once a phase was completed, the corresponding chapters were created in IFRS 9 and withdrawn from IAS 39 Financial Instruments: … Read more