Revenue not from a contract with a customer – Revenue from transactions or events that does not arise from a contract with a customer is not in the scope of IFRS 15 and should continue to be recognized in accordance with other standards. Such transactions or events include but are not limited to: Revenue not from a contract with a customer
- Dividends, Revenue has to be recognized when the owner’s right to receive payment is established. It is only certain when the company declare the dividends on the shares and the directors actually decide to pay the dividends to their shareholders,
- Non-exchange transactions, such as donations or contributions. For example, contributions received by a not-for-profit entity are not within the scope of the revenue standard if they are not given in exchange for goods or services (that is, they represent non-exchange transactions). Contributions are unconditional transfers of assets (or a settlement of liabilities) to a nonprofit entity that are nonreciprocal — meaning the donor receives nothing of value in exchange for the donation. A contribution should be recognized at its fair market value in the period it was received and/or unconditionally given. Donor-imposed restrictions do not affect the timing or value of the recognition,
- Changes in the fair value of biological assets, investment properties, and the inventory of broker-traders. Biological assets are valued at fair value less costs to sell, the change in this fair value less costs to sell is recognised in profit or loss, separate from revenue on sales of the biological assets, but included in operating income. Changes in fair value of investment properties are recognised in operating income, separate from net rental income. Trading assets and liabilities are initially recognised and subsequently measured at fair value in the statement of financial position with transaction costs taken directly to profit or loss. All changes in fair value of trading assets and liabilities are recognised as part of net trading income in profit or loss. Trading assets and liabilities are not reclassified subsequent to their initial recognition. Revenue not from a contract with a customer
Other ways to look a this
– Non-contractual customer relationships in IFRS 3 Business combinations
A customer relationship acquired in a business combination that does not arise from a contract may nevertheless be identifiable because the relationship is separable. Exchange transactions for the same asset or a similar asset that indicate that other entities have sold or otherwise transferred a particular type of non-contractual customer relationship would provide evidence that the relationship is separable.
As a result it may be identified as a separate intangible asset.
– Non-contractual relationship
Every year for the past twenty years a catering entity has paid CU50,000 towards the costs of the carnival in the village in which the entity operates. The entity is well known as the main sponsor of the annual event and its advertisements include reference to its status as main sponsor of the village carnival. The villagers now expect the entity to pay CU50,000 to cover the costs of the carnival this year.
The obligation to pay CU50,000 does not arise from a contract and hence is not a financial liability. The obligation may meet the conditions to be recognised as a constructive obligation in the scope of Section 21 Provisions and Contingencies (ie if through its advertisements and by its established pattern of paying the sponsorship each year the entity has created a valid expectation by the villagers that it will make the payment).
Note: If, however, the catering entity entered into a contract to pay CU50,000 towards the village carnival, then the entity has a financial liability.
See also: The IFRS Foundation
Revenue not from a contract with a customer
Revenue not from a contract with a customer Revenue not from a contract with a customer Revenue not from a contract with a customer