IFRS 15 Revenue Disclosures Examples

IFRS 15 Revenue Disclosures Examples

IFRS 15 Revenue Disclosures Examples provides the context of disclosure requirements in IFRS 15 Revenue from contracts with customers and a practical example disclosure note in the financial statements. However, as this publication is a reference tool, no disclosures have been removed based on materiality. Instead, illustrative disclosures for as many common scenarios as possible have been included.

Please note that the amounts disclosed in this publication are purely for illustrative purposes and may not be consistent throughout the example disclosure related party transactions.

Users of the financial statements should be given sufficient information to understand the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. To achieve this, entities must provide qualitative and quantitative information about their contracts with customers, significant judgements made in applying IFRS 15 and any assets recognised from the costs to obtain or fulfil a contract with customers. [IFRS 15.110]

Disaggregation of revenue

[IFRS 15.114, IFRS 15.B87-B89]

Entities must disaggregate revenue from contracts with customers into categories that depict how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors. It will depend on the specific circumstances of each entity as to how much detail is disclosed. The Reporting entity Plc has determined that a disaggregation of revenue using existing segments and the timing of the transfer of goods or services (at a point in time vs over time) is adequate for its circumstances. However, this is a judgement and will not necessarily be appropriate for other entities.

Other categories that could be used as basis for disaggregation include:IFRS 15 Revenue Disclosures Examples

  1. type of good or service (eg major product lines)
  2. geographical regions
  3. market or type of customer
  4. type of contract (eg fixed price vs time-and-materials contracts)
  5. contract duration (short-term vs long-term contracts), or
  6. sales channels (directly to customers vs wholesale).

When selecting categories for the disaggregation of revenue entities should also consider how their revenue is presented for other purposes, eg in earnings releases, annual reports or investor presentations and what information is regularly reviewed by the chief operating decision makers. [IFRS 15.B88]

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1st and best IFRS Accounting for client money

IFRS Accounting for client money

If an entity holds money on behalf of clients (‘client money’):

  • should the client money be recognised as an asset in the entity’s financial statements?
  • where the client money is recognised as an asset, can it be offset against the corresponding liability to the client on the face of the statement of financial position?

DEFINITION: Client money

“Client money” is used to describe a variety of arrangements in which the reporting entity holds funds on behalf of clients. Client money arrangements are often regulated and more specific definitions of the term are contained in some regulatory pronouncements. The guidance in this alert is not specific to any particular regulatory regime.

Entities may hold money on behalf of clients under many different contractual arrangements, for example:

  • a bank may hold money on deposit in a customer’s bank account;
  • a fund manager or stockbroker may hold money on behalf of a customer as a trustee;
  • an insurance broker may hold premiums paid by policyholders before passing them onto an insurer;
  • a lawyer or accountant may hold money on behalf of a client, often in a separate client bank account where the interest earned is for the client’s benefit.

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Transfer of control for distinct licences

Transfer of control for distinct licencesTransfer of control for distinct licences – IFRS 15 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 satisfy a performance obligation over time, the performance obligation is satisfied at a point in time. A performance obligation is satisfied over time if it meets one of the following criteria: Transfer of control for distinct licences

  • The customer simultaneously receives and consumes the benefits provided by the entity’s performance as the entity performs – by providing hosting services, for example. Transfer of control for distinct licences
  • The entity’s performance creates or enhances an asset that the customer controls as the asset is created
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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

IFRS 10 Principal versus agent considerations

Principal versus agent considerations – Certain decision-makers may be obligated to exercise their decision powers on behalf of other parties and do not exercise their decision powers for their own benefit. IFRS 10 regards such decision-makers as ‘agents’ that are engaged to act on behalf of another party (the ‘principal’).

A principal may delegate some of its power over the investee to the agent, but the agent does not control the investee when it exercises that power on behalf of the principal (IFRS 10.B58).

Power normally resides with the principal rather than the agent (IFRS 10.B59). There may be multiple principals, in which case each of the principals should assess whether it has power over the … Read more

Long-term supply contracts

Long-term supply contracts – To apply IFRS 15, automotive parts suppliers (APSs) will need to change the way they evaluate long-term supply contracts. APSs need to use significant judgement when they identify separate performance obligations (i.e., units of account), which may be different from those identified under IAS 18.

Tooling equipmentLong-term supply contracts

APSs commonly enter into long-term arrangements with Original Equipment Manufacturers (OEMs) to provide specific parts, such as seat belts or steering wheels. An arrangement typically includes the construction for the tooling, which is required to be used when manufacturing the parts to meet the OEM’s specifications. In many cases, the APS will construct and transfer the legal title for the tooling to the OEM after construction, even though they … Read more

Extra disclosures IFRS 15 contracts

Extra disclosures IFRS 15 contracts – 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.

Contract balances

The disclosures related to contract balances are extensive and intended to enable users to understand the relationship between the revenue recognised and changes in overall balances of total contract assets and liabilities in a particular reporting period. Extra disclosures IFRS 15 contracts Contract assets: An entity’s right to consideration in exchange for goods or services that the entity has transferred to a customer when that right is conditioned on something other than the passage of time (for example, the entity’s future performance),
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Revenue recognition at a point in time

Revenue recognition at a point in time is included in IFRS 15 Revenue from Contracts with Customers (contents page is here), that 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. Revenue recognition at a point in time

We can say that Read more

Restrictions on transferred assets

Restrictions on transferred assets - Stipulations that limit or direct the purposes for which a transferred asset may be used, but do not specify future benefit