Obligations may be legally enforceable as a consequence of a binding contract or statutory requirement. This is normally the case, for example, with amounts payable for goods and services received. However, obligations do not have to be legally binding. Related posts: Liability Transfer of an economic resource Financial Position Present obligation as a result of […]
Read MoreA customer may have the option to separately purchase a warranty on a product (e.g., computer hardware, networking equipment) for a period of time at the point of sale or the warranty may be explicitly stated in the contract. The standard identifies two types of warranties: Warranties that provide a service to the customer in […]
Read MoreIFRS 15 also could change practice for entities that sell their products through distributors or resellers (collectively referred to in this section as resellers). It is common in the technology industry for entities to provide resellers with greater rights than end-customers. For example, an entity may provide a reseller with price protection and extended rights […]
Read MoreIn certain technology transactions, the entity fulfils its obligations and invoices the customer for the work performed, but does not ship the goods until a later date. These transactions, often called ’bill-and-hold‘ transactions, are usually designed this way at the request of the customer for a variety of reasons, including the customer’s lack of storage […]
Read MoreEntities may deliver inventory on a consignment basis to other parties (e.g., distributor, dealer). By shipping on a consignment basis, consignors are able to better market products by moving them closer to the end-customer. However, they do so without selling the goods to the intermediary (consignee). Entities entering into consignment arrangements must determine the nature […]
Read MoreAn entity recognises revenue only when it satisfies a performance obligation by transferring control of a promised good or service to the customer. Control of an asset refers to the ability of the customer to direct the use of and obtain substantially all of the cash inflows, or the reduction of cash outflows, generated by […]
Read MoreOnce the performance obligations have been identified and the transaction price has been determined, the entity is required to allocate the transaction price to the performance obligations, generally in proportion to their stand-alone selling prices (i.e., on a relative stand-alone selling price basis), with two exceptions. Firstly, IFRS 15 requires an entity to allocate variable […]
Read MoreIf an arrangement involves three or more parties, an entity will have to determine whether it is acting as a principal or an agent in order to determine the amount of revenue to which it is entitled. For example, technology entities may offer a platform to sell virtual or digital goods on behalf of a […]
Read MoreIn many technology transactions, customers pay an upfront fee at contract inception, which may relate to the initiation, activation or set-up of a good to be used or a service to be provided in the future. Under the standard, entities must evaluate whether non-refundable upfront fees relate to the transfer of a good or service. […]
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