Single contract – Annual Reporting

5 steps in IFRS 15 – best quick read

26/07/202124/05/2021 by 75385885

5 steps in IFRS 15

Under IFRS 15 Revenue from contracts with customers, entities apply the 5 steps in IFRS 15 to determine when to recognize revenue, and at what amount. The model specifies that revenue is recognized when or as an entity transfers control of goods or services to a customer at the amount to which the entity expects to be entitled. Depending on whether certain criteria are met, revenue is recognized:

over time, in a manner that best reflects the entity’s performance; or
at a point in time, when control of the goods or services is transferred to the customer.

IFRS 15 provides application guidance on numerous related topics, including warranties and licenses. It also provides guidance on when to capitalize the costs of obtaining a contract and some costs of fulfilling a contract (specifically those that are not addressed in other relevant authoritative guidance – e.g. for inventory).

5 steps in IFRS 15 – What is IFRS 15?

Step 1: Identify the contract with a customer

A contract with a customer is in the scope of IFRS 15 when the contract is legally enforceable and certain criteria are met. If the criteria are not met, then the contract does not exist for purposes of applying the general model of IFRS 15, and any consideration received from the customer is generally recognized as a deposit (liability). Contracts entered into at or near the same time with the same customer (or a related party of the customer) are combined and treated as a single contract when certain criteria are met.

A contract with a customer is in the scope of IFRS 15 when it is legally enforceable and meets all of the following criteria. [IFRS 15.9]

Asset management or investment management

19/05/2021 by 75385885

Asset management or investment management

are closely related industries that in their core refer to the financial service of managing assets by means of financial instruments and/or other investments with the aim of increasing the invested assets.

An asset manager is a financial professional who analyses, collects and handles a client’s financial portfolio. Asset managers focus on specific asset investments, such as real estate, exchange-traded funds, stocks or fixed-income securities. An asset manager’s goal is to increase returns from client investments and restructure them when needed to gain their clients more profit.

An investment manager is a general term for a financial professional who uses risk assessment to ensure their clients receive a profitable return on their investments. Their duties include tax planning, estate planning, retirement planning, philanthropy and education. The main goal of an investment manager is to generate a steady flow of profit through investment strategies for their clients.

A primary difference between asset managers and investment managers is their customer base. Asset managers typically work with individuals or businesses that have extensive amounts of money, while investment managers often work with individuals or businesses with any size of income.

The two most significant IFRS accounting matters for asset management or investment management entities are:

Timing of revenue and profit recognition
Valuation of investments (assets) the entity holds or invests on behalf of its customers
- IFRS 9 Financial instruments, and
- IAS 40 Investment property.

Construction contract – How 2 best account for it in IFRS 15

25/02/202017/05/2019 by 75385885

A construction contract is a contract specifically negotiated for the construction of (a combination of) assets that are closely interrelated in terms of design

Contingent consideration

23/02/202024/02/2019 by 75385885

Contingent consideration is the obligation of the buyer to transfer additional assets or equity interests if future events occur or certain conditions are met

Substance of rights and obligations – 1 Best Complete Read

23/02/202017/04/2019 by 75385885

Substance of rights and obligations to represent those rights and obligations faithfully, financial statements report their substance. Some are clear others not

Credit derivatives – How 2 better understand it

23/02/202001/05/2019 by 75385885

Credit derivatives allow a lender or borrower to transfer the default risk of a loan to a third party. These are credit default swaps and credit linked notes.

Unit of account

15/02/202011/02/2019 by 75385885

The ‘Unit of account’ definition is used for both assets and liabilities in (un)grouping transactions for financial reporting purposes and is primarily used as a term to which recognition and measurement requirements are applied. Explanatory example: A lessee has leased an entire office building with five floors and accounted for that lease as a single separate lease component. Partway through the lease term, the lessee commits to a plan to sublease one of the five floors. In other words, the lessee will sublease a portion of what it has previously accounted for as a single unit of account. The following table features several examples of how to determine the “identified asset” in arrangements where the unit of account is unclear … Read more

What can happen to a contract with a customer?

27/01/202028/02/2019 by 75385885

What can happen to a contract with a customer? – 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. In step 1 Identify the contract there are some specifically identified circumstances to capture the day-to-day complexities of selling products and services to customers into useful financial reporting: Combination of contracts, … Read more

Identify the contract with the customer – Engineering & Construction industry

21/12/201920/05/2019 by 75385885

Identify the contract with the customer – 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. Identify the contract with the customer The model in IFRS 15 applies to each contract with a customer. Contracts may be written, oral or implied by an entity’s customary business practices, but must be legally enforceable and meet specified attributes. To apply the five-step model in IFRS 15, an entity must first identify the contract, or contracts, to provide goods or services to customers. Attributes of a contract Identify the contract with the customer To help entities determine whether (and when) their arrangements with … Read more

Reinsurance contracts held

17/12/201926/05/2019 by 75385885

Reinsurance contracts held – A reinsurance contract is an insurance contract issued by one entity (the reinsurer) to compensate another entity for claims arising from one or more insurance contracts issued by the other entity (underlying contracts). IFRS 17 requires a reinsurance contract held to be accounted for separately from the underlying insurance contracts to which it relates. This is because an entity that holds a reinsurance contract (a cedant) does not normally have a right to reduce the amounts it owes to the underlying policyholder by amounts it expects to receive from the reinsurer. A cedant measures reinsurance contracts it holds by applying a modified version of the general model or, if the contract is eligible, the premium allocation … Read more