IFRS 15 Quick overview Revenue from contracts with customers

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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

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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

Contract modifications and variable consideration

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Contract modifications and variable consideration are discussed on this page.

IFRS 15 Revenue from Contracts with Customers (contents page is here) 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. Contract modifications and variable consideration

Contract modification

A contract modification arises when the parties approve a change in the scope and/or the price of a … Read more

Refinancing of bank debt

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Refinancing of bank debt is a case of different intercompany financing arrangements at arm’s length investment terms and at (more of) intercompany investment terms or at (third party) bank finance terms. As a result it includes quite a lot of special explanations of issues faced in such less standard financing terms.

Assume Parent A advances a €200k unsecured loan to Subsidiary B on 1 January 2018. The loan is interest-free and is repayable in 5 years. At the same time, Bank X advances a €800k secured loan to Subsidiary B. The loan carries market rate of interest of 5% and is repayable in 5 years.

At initial recognition Parent A concluded that the loan to Subsidiary B Read more

Borrowing costs

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IAS 23 Borrowing Costs requires that borrowing costs directly attributable to the acquisition, construction or production of a ‘qualifying asset’ (one that necessarily takes a substantial period of time to get ready for its intended use or sale) are included in the cost of the asset. Other borrowing costs are recognised as an expense.

Scope

IAS 23 shall be applied in accounting for borrowing costs but it does not deal with the actual or imputed cost of equity, including preferred capital not classified as a liability.

The standard does not apply to borrowing costs directly attributable to acquisition, construction or production of:

  • a qualifying asset measured at fair value, e.g. a biological asset; or 
  • inventories that
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Revenue from additional goods or services

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Revenue from additional goods or services – Under some contracts, entities provide the customer with the right to future purchases of additional tech products or services for an amount below fair value.

Under IFRS 15, such options are separate performance obligations if they provide a material right to the customer that it would not receive without entering into that contract. For example, it may convey a material right if the discount exceeds the range of discounts typically given for those goods or services to that class of customer in that geographical area or market.

If an option is a separate performance obligation, a portion of the transaction price is allocated to the option (see Allocation of transaction Read more

Purchase price of PPE

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Purchase price of PPE – Here is one complete case of the purchase price and other cost that may be capitalised when acquiring a non-current asset in the day-to-day business.

THE CASE Purchase price of property

Entity K purchased a plant for a gross price of CU 200 million. The seller granted a 0.5% rebate. The gross price includes excise duty CU 18 million for which the buyer entity will get a tax refund and non-refundable VAT of CU 10 million. The company has also incurred CU 15 million for transportation costs, handling charges and insurance, CU 5 million for installation and CU 3 million for testing and technical engineering fees. It has earned CU 0.2 million Read more

Determine the transaction price

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Determine the transaction price – 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. Determine the transaction price


The transaction price is the amount of consideration to which an entity expects to be entitled in exchange for transferring promised goods or services to a customer, excluding amounts collected on behalf of third parties. This amount is meant to reflect the amount to which the entity has rights under the present contract, which may differ from the contractual price (e.g., if the entity intends to offer a price concession). The consideration promised in a contract may include … Read more