Step 2 Identify the performance obligations in the contract

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: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

INTRO – Step 2 Identify the performance obligations in the contract – The processRead more

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

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.A court case

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 … Read more

Identify Equipment and consumables industry obligations

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.hp 1

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

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 … Read more

Dealer sales vehicle incentives

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 Read more

Promises in a contract – IFRS 15 Best complete read

Promises in a contractWhat 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 … Read more