Transition to new IFRS 15 standard Disclosures

Disclosures for IFRS 15 Revenue from contracts with customers in respect of transition options:

Requirements:

IFRS paragraphNarrative
IAS 1:117(b)Disclose accounting policies that are relevant to understanding the financial statements (i.e. those for material items).
IFRS 15:119Disclose information about performance obligations in contracts with customers, including a description of all of the following:
  1. When the entity typically satisfies its performance obligations (for example, upon shipment, upon delivery, as services are rendered or upon completion of service), including when performance obligations are satisfied in a bill-and-hold arrangement;
  2. The significant payment terms (for example, when payment is typically due, whether the contract has a significant financing component, whether the consideration amount is variable and whether the estimate of variable consideration is typically constrained in accordance with Paragraphs 56-58);
  3. The nature of the goods or services that the entity has promised to transfer, highlighting any performance obligations to arrange for another party to transfer goods or services (ie if the entity is acting as an agent);
  4. Obligations for returns, refunds and other similar obligations; and
  5. Types of warranties and related obligations.
IFRS 15:123Disclose the judgements, and changes in the judgements, made in applying this Standard that significantly affect the determination of the amount and timing of revenue from contracts with customers. In particular, an entity shall explain the judgements, and changes in the judgements, used in determining both of the following:
  1. The timing of satisfaction of performance obligations (see Paragraphs 124-125); and
  2. The transaction price and the amounts allocated to performance obligations (see Paragraph 126).
IFRS 15:124For performance obligations that an entity satisfies over time, disclose both of the following:
  1. The methods used to recognise revenue (for example, a description of the output methods or input methods used and how those methods are applied); and
  2. An explanation of why the methods used provide a faithful depiction of the transfer of goods or services.
IFRS 15:125For performance obligations satisfied at a point in time, disclose the significant judgements made in evaluating when a customer obtains control of promised goods or services.

Suggested example disclosure:

Based on these requirements the following example is suggested:

The case:

A vendor has a single four year contract which runs from 1 January 2015 to 31 December 2018. The total consideration receivable is fixed at CU 2,000,000 and, under current IFRSs, is being recognised over that four year period as follows:

2015: CU 800,000
2016: CU 400,000
2017: CU 400,000
2018: CU 400,000

Under IFRS 15, revenue would have been recognised evenly over the four year period (CU 500,000 in each year).

Under each of the transition options, the effect would be:

Retrospective equity adjustment

The retrospective equity adjustment of 200 is calculated as the difference as at 1 January 2017 between the cumulative amount of revenue recognised in accordance with existing IFRS (1,200, being 800 in 2015 and 400 in 2016) and the amount that would have been recognised in accordance with IFRS 15 (1,000, being 500 in each of 2015 and 2016).

Cumulative effect adjustment

The cumulative effect adjustment of 100 is calculated as the difference as at 1 January 2017 between the cumulative amount of revenue recognised in accordance with existing IFRS (1,600, being 800 in 2014 and 400 in each of 2015 and 2016) and the amount that would have been recognised in accordance with IFRS 15 (1,500).

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