Promises in a contract

Step 2 Identify the performance obligations in the contract

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Step 2 Identify the performance obligations in the contract – is the second step in IFRS 15 Revenue from contracts with customers. IFRS 15 The revenue recognition standard provides a single comprehensive standard that applies to nearly all industries and has changed revenue recognition quite significant. Step 2 Identify the performance obligations in the contract IFRS 15 introduced a five step process for recognising revenue, as follows: Identify the contract with the customer Identify the performance obligations in the contract Determine the transaction price for the contract Allocate the transaction price to each specific performance obligation Recognise the revenue when the entity satisfies each performance obligation INTRO – Step 2 Identify the performance obligations in the contract – The process … Read more

What are enforceable contracts with customers? – IFRS 15 Best complete read

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What are enforceable contracts with customers – 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. The assessment of whether a contract exists for the purposes of applying IFRS 15 focuses on the enforceability of rights and obligations rather than the form of the contract (oral, implied, or written). What … Read more

Identify Equipment and consumables industry obligations

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Identify Equipment and consumables industry obligations – This is an example in a small series for illustrating the concepts in What is a good or service that is distinct? In the Basis for Conclusions to IFRS 15 the Board also makes it clear that an important consideration is whether one promise in a contract has a transformative effect on another promise. The principle is whether two or more goods or services that might be capable of being distinct are used as inputs that are used to produce one single item. In contrast, if a vendor’s promise to its customer contains two or more goods or services that depend on each other, such as equipment and related consumables that are needed … Read more

1 to Read at best – Implicit promises in a contract

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Implicit promises in a contract 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. Implicit promises in a contract 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. Implicit promises in a contract This section is part of step 2 identifying performance obligations. Goods or services that are to be transferred to a customer are normally specified in a … Read more

Dealer sales vehicle incentives

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Dealer sales vehicle incentives – Some automotive entities (including automotive parts suppliers (APSs) and original equipment manufacturers (original equipment manufacturers (OEM)s)) needed to change certain revenue recognition practices as a result of applying the revenue recognition standard, IFRS 15 Revenue from Contracts with Customers.  These standards superseded virtually all previous revenue recognition requirements in IFRS and US GAAP. Original equipment manufacturers 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. original equipment manufacturers (OEM)s frequently offer sales incentives in contracts to sell vehicles to dealers. These sales incentives may include cash rebates, bonuses or other types of incentives made available to dealers and retail … Read more

Promises in a contract – IFRS 15 Best complete read

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What are promises in a contract, from an accounting/financial reporting point of view and from a legal point of view. 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. Promises in a contract from an accounting/financial reporting point of view Promises in a contract can be explicit, or implicit if … Read more