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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IFRS 15 Contracts with customers

IFRS 15 Contracts with customers defines a contract as an agreement between two or more parties that creates enforceable rights and obligations.

Based on IFRS 15.9, an entity should account for a contract with a customer that is within its scope only when all of the following criteria are met:

  1. The parties to the contract have approved the contract and are committed to perform their respective obligations. IFRS 15 Contracts with customers
  2. The entity can identify each party’s rights regarding the goods or services to be transferred.
  3. The entity can identify the payment terms for the goods or services to be transferred.
  4. The contract has commercial substance. IFRS 15 Contracts with customers
  5. It is probable that the entity will collect substantially all of the
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Offsetting

Offsetting – Identifying, recognising and measuring both an asset and a liability as separate units of account, but presenting them in the statement of financial position as a single net amount.

Offsetting, otherwise known as netting, takes place when entities present their rights and obligations to each other as a net amount in their statements of financial position. (IFRS 7 13A – 13F)

IAS 32 42 is one of few IFRS paragraphs regarding offsetting: A financial asset and a financial liability shall be offset and the net amount presented in the statement of financial position when, and only when, an entity:

  1. currently has a legally enforceable right to set off the recognised amounts; and
  2. intends either to settle
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