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 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

Technology reseller arrangements

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Technology reseller arrangements – IFRS 15 also changed practice for entities that sell their products through distributors or resellers (collectively referred to in this section as resellers). It is common in the technology industry for entities to provide resellers with greater rights than end-customers. For example, an entity may provide a reseller with price protection and extended rights of return.

Under IFRS 15, entities will need to first evaluate when control of the product transfers to the end-customer. To do this, first, entities may need to assess whether their contracts with resellers are consignment arrangements, under which control likely would not transfer until delivery to the end-customer (see Consignment arrangements). The standard provides three indicators that … 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

Assessing collectibility for a portfolio of contracts

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Assessing collectibility for a portfolio of contracts – In the first step in IFRS 15 Revenue from contract with customers ‘Step 1 Identify the contract with the customer’, five elements have to be present in order to have a contract (Step 1 Identify the contract with the customer), on being that it is probable that the entity will collect substantially all of the consideration to which it will be entitled in exchange for the goods or services that will be transferred to the customer. Assessing collectibility for a portfolio of contracts

Recognising whether a contract exists requires some evaluation of the customer, and if collection is likely to occur. For example, the amount of consideration … Read more

Variable consideration of the transaction price

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Variable consideration of the transaction price – 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. Variable consideration of the transaction price

This section is part of step 3 determining the transaction price. Instead of the amount of consideration specified in a contract Read more

Constraining estimates of variable consideration

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Constraining estimates of variable consideration – One of the most significant departures from prior GAAP is the treatment of variable consideration. In the past, revenue could only be recognized in the amount of the fixed or determinable portion of the sales price, not any variable consideration. The new revenue standard is instead based on the core principle that revenue is Highly probable Highly probable Highly probable Highly probable the amount the company expects to receive based upon the contract.

It allows a company to recognize estimated variable consideration as revenue subject to a “constraint” rule, which stipulates that the estimated amount must be adjusted downward to exclude any amount for which it is “probable” (U.S. GAAP) or “highly probable” (IFRS) that a significant reversal will … Read more