Distinct goods or services

Why do we need to know whether a good or service is distinct?

Cambridge dictionary definition: Distinct means clearly noticeable – that clearly exists, and an adjective at the same definition that is very useful to IFRS 15:  clearly separate and different (from something else).

So a first clarification is: Distinct goods or services = Goods or services that are clearly separate and different from each other.

Some variations resulting from this:

Good(s) clearly separate and different from (an)other good(s), Good(s) clearly separate and different from a service, Service(s) clearly separate and different from (an)other service(s).


So now we are up to the more IFRS-ish language on how to decide whether or NOT a service or a good is distinct –  Read more

Transfer of control for distinct software licences

IFRS 15 provides additional application guidance to help entities determine when control transfers for distinct licences of intellectual property (transfer of control for distinct software licences), based on the nature of the promise to the customer. This application guidance is applicable for both perpetual and term software licences.

IFRS 15 states that entities provide their customers with either:

transfer of control for distinct software licences

If the licence does not meet all three criteria, the licence is a right to use by default and the entity would recognise revenue at the point in time when the licence is delivered.

The key determinant of whether a licence is a right to access is whether the entity is required to undertake … Read more

Step 2 Identify the performance obligations in the contract

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

IFRS 15 introduced a five step process for recognising revenue, as follows: Step 2 Identify the performance obligations in the contract

    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


Step two, identifying the performance obligations in the contract, is a critical step because it impacts both how much revenue will be recognised, as well as when a company can record revenue. Identify the performance obligations in the contract Identify the performance obligations Read more

Revenue recognition for technological goods/services

Technology entities commonly enter into transactions involving the delivery of multiple goods and services, such as professional services provided in conjunction with hardware and networking or hosting services. Goods or services promised in a contract with a customer can be either explicitly stated in the contract or implied by an entity’s customary business practice (e.g., free access to a vendor’s online mobile controller application with the purchase of its audio hardware). IFRS 15 requires entities to consider whether the customer has a valid expectation that the entity will provide a good or service even when it is not explicitly stated. If the customer has a valid expectation, the customer would view those promises as part of the goods or services Read more

Separation from an insurance contract

An entity applies the principles in IFRS 15 on how to separate a contract with a customer that is partially within the scope of IFRS 15 and partially within the scope of other standards. The allocation of cash flows between the host insurance contract and the distinct goods or non-insurance services must be based on the stand-alone selling price of the components. In the absence of stand-alone selling prices that are directly observable, an entity must estimate the stand-alone selling prices to allocate the transaction price to each of the components. Cash outflows must be allocated to their related component, or, if not clearly related to one of the components, systematically and rationally allocated between components [IFRS 17 12Read more

Separation of Insurance Contracts

Before the entity accounts for an insurance contract based on the guidance in IFRS 17, it should analyse whether the contract contains components that should be separated. IFRS 17 distinguishes between three different kinds of component that have to be accounted for separately if certain criteria are met: Separation of Insurance Contracts

An entity applies IFRS 17 to all remaining components of the contract. Separation of other non-insurance components is prohibited.

Under IFRS 17 separation of any components (except the three components above) is prohibited unless it is explicitly required under the standard. This might have … Read more