IFRS 15 Quick overview Revenue from contracts with customers

IFRS 15 Quick overview Revenue from contracts with customers – the easy way to obtain an solid overview.

What is the objective of IFRS 15?

To establish 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.

How does IFRS 15 meet this objective?

The core principle of IFRS 15 is that an entity should recognise revenue to depict the transfer of promised goods or services to the customer in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.

Practical expedient – the portfolio

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Step 5 Recognise the revenue when the entity satisfies each performance obligation

Step 5 Recognise the revenue when the entity satisfies each performance obligation the the end of the process in revenue recognition as introduced by IFRS 15 Revenue from contracts with customers. Step 5 Recognise the revenue

IFRS 15 The revenue recognition standard provides a single comprehensive standard that applies to nearly all industries and has changed revenue recognition quite significant. Step 5 Recognise the revenue

IFRS 15 introduced a five step process for recognising revenue, as follows: Step 5 Recognise the revenue

  1. Identify the contract with the customer
  2. Identify the performance obligations in the contract
  3. Determine the transaction price for the contract
  4. Allocate the transaction price to each specific performance obligation
  5. Recognise the revenue when the entity satisfies each performance obligation

In step five, Read more

IFRS 15 Vehicle sales by Original Equipment Manufacturers (OEMs)

IFRS 15 Vehicle sales by Original Equipment Manufacturers (OEMs) shows examples of real life situations, in this case close at home, selling cars and when is it really sold as per IFRS 15. An Original Equipment Manufacturer (OEM) typically sells the cars and trucks that it produces to a dealer that then sells the vehicles to consumers. Under IFRS 15, an OEM recognizes revenue for the sale of a vehicle when it transfers control of the vehicle to its customer (i.e., the dealer). Control of the vehicle transfers to the dealer when the dealer has the ability to direct the use and obtain substantially all the remaining benefits of the vehicle. IFRS 15 Vehicle sales by Original Equipment Manufacturers

OEMs … Read more

Recognise revenue when or as the entity satisfies each performance obligation

Recognise revenue when or as the entity satisfies each performance obligation – This part relates to a complete explanation of IFRS 15 Revenue from contracts with customers in respect of Engineering & Construction contracts, see Revenue from Engineering & Construction contracts.


Under IFRS 15, an entity recognises revenue when (or as) it satisfies a performance obligation by transferring a promised good or service to a customer. A good or service is considered to be transferred when the customer obtains control. Control of the good or service refers to the ability to direct its use and to obtain substantially all of its remaining benefits (i.e., right to cash inflows or reduction of cash outflows generated by the good or service). Read more

Lease of a ship

The case: Lease of a ship

Customer enters into a contract with Supplier for the use of a specified ship for a five-year period. The ship is explicitly specified in the contract and Supplier does not have substitution rights.

Customer decides what cargo will be transported, and whether, when and to which ports the ship will sail, throughout the five-year period of use, subject to restrictions specified in the contract. Those restrictions prevent Customer from sailing the ship into waters at a high risk of piracy or carrying hazardous materials as cargo.

Supplier operates and maintains the ship and is responsible for the safe passage of the cargo on board the ship.

Customer is prohibited from hiring another operator for

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IFRS 16 into the details

Recognition of a lease IFRS 16 into the details

To start for the first time a reporting entity has to review all contracts to see whether a specific contract is a lease only or contains a lease component.

Looking at the definition of a lease the reporting entity has to assess whether, throughout the period of use, the lessee has met the following two rights:

  1. the right to obtain substantially all of the economic benefits from the use of the identified asset, and IFRS 16 into the details
  2. the right to direct the use of the identified asset.

There may be a difference between the period of the contract and the period of right to direct the use, the contract contains a lease for Read more

Lease of retail space

Lease of retail space – When is a lease a lease and capitalised in the balance sheet and when is a contract a rental contract not a lease and expensed through profit or loss and disclosed as off-balance sheet commitments. Want to assess a no lease, look here and below a case is provided of a lease. Lease of retail space Lease of retail space

The case: Lease of retail space Lease of retail space

Customer enters into a contract with a property owner (Supplier) to use Retail Unit A for a five-year period. Retail Unit A is part of a larger retail space with many retail units.

Customer is granted the right to use Retail Unit A. Supplier can

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Lease and No lease Fibre-optic cable

Lease and No lease Fibre-optic cable – What case is a lease and what case is not a lease? Key to the answers of this question is whether the identified right to use is a distinct good or service. It shows that wording in a contract is of major importance to qualify or disqualify for  IFRS 16 Leases. Or depending on want your preference is the contract wording has to be assessed.

The case 1: Lease  – Fibre-optic cable

Customer enters into a 15-year contract with a utilities company (Supplier) for the right to use three specified, physically distinct dark fibres within a larger cable connecting Hong Kong to Tokyo. Customer makes the decisions about the use of the fibres
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IFRS 16 Right to use

IFRS 16 Right to use – throughout the period of use the lessee has to meet the following two rights: IFRS 16 Right to use

  1. the right to obtain substantially all of the economic benefits from the use of the identified asset, and IFRS 16 Right to use
  2. the right to direct the use of the identified asset. IFRS 16 Right to use


To start simple….. IFRS 16 Right to use

  1. By having exclusive use of the asset over the period of the lease, by having use of its output or by sub-letting the asset, the right to obtain substantially all of the economic benefits from the use of the identified asset has been met, and IFRS 16 Right to
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Satisfaction of performance obligations

Satisfaction of performance obligations – An 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 the goods or services. Control also means the ability to prevent other entities from directing the use of, and receiving the benefit from, a good or service. Satisfaction of performance obligations

The standard indicates that an entity must determine at contract inception whether it will transfer control of a promised good or service over time. If an entity does not … Read more