Ifrs-15-revenue-from-contracts-with-customers-summary

.pdf
School
Christ the King Catholic High School **We aren't endorsed by this school
Course
BIO 1230
Subject
Accounting
Date
Mar 19, 2023
Pages
9
Uploaded by LieutenantDangerChinchilla30 on coursehero.com
Studocu is not sponsored or endorsed by any college or university Ifrs 15 revenue from contracts with customers summary BS Accountancy (Mindanao State University) Studocu is not sponsored or endorsed by any college or university Ifrs 15 revenue from contracts with customers summary BS Accountancy (Mindanao State University) Downloaded by Kristine Angelika Labonite ([email protected]) lOMoARcPSD|12116151
S U M M A R Y IFRS 15 Revenue from Contracts with Customers 1 Overview IFRS 15 Revenue from Contracts with Customers was issued on 28 May 2014. It supersedes: IAS 18 Revenue; IAS 11 Construction contracts; IFRIC 13 Customer Loyalty Programmes; IFRIC 15 Agreements for the Construction of Real Estate; IFRIC 18 Transfers of Assets from Customers; and SIC-31 Revenue - Barter Transactions Involving Advertising Services. IFRS 15 will improve comparability of reported revenue over a range of industries, companies and geographical areas globally. Objective 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. Scope The new revenue model would apply to all contracts with customers except leases, insurance contracts, financial instruments, guarantees and certain non-monetary exchanges. The sale of non-monetary financial assets, such as property, plant and equipment, real estate or intangible assets will also be subject to some of the requirements of the new model. A contract with a customer may be partially within the scope of IFRS 15 and partially within the scope of another standard, in which case: If the other standards specify how to separate and/or initially measure one or more parts of the contract, then an entity shall apply those separation and measurement requirements first. The transaction price is then reduced by the amounts that are initially measured under other standards. If other standards do not provide guidance on how to separate and/or initially measure one or more parts of the contract, then IFRS 15 will be applied. Effective date IFRS 15 is effective for annual periods beginning on or after 1 January 2017 with early application permitted. It applies to existing contracts that are not yet complete as of the effective date and new contracts entered into on or after the effective date. Therefore, in the first year of adoption, the current year figures will be measured and disclosed as if the new revenue model had always been applied. Downloaded by Kristine Angelika Labonite ([email protected]) lOMoARcPSD|12116151
IFRS 15 Revenue from Contracts with Customers 2 Defined terms IFRS 15 defines the following terms that form an integral part of this IFRS. Contract - An agreement between two or more parties that creates enforceable rights and obligations. Customer - A party that has contracted with an entity to obtain goods or services that are an output of the entity's ordinary activities in exchange for consideration. Income - Increases in economic benefits during the accounting period in the form of inflows or enhancements of assets or decreases of liabilities that result in an increase in equity, other than those relating to contributions from equity participants. Performance obligation - A promise in a contract with a customer to transfer to the customer either: a) A good or service (or a bundle of goods or services) that is distinct; or b) A series of distinct goods or services that are substantially the same and that have the same pattern of transfer to the customer. Revenue - Income arising in the course of an entity's ordinary activities. Transaction price (for a contract with a customer) - 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. The revenue model The standard introduces a revenue model in which the core principle 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. To recognise revenue the following five steps should be applied: Step 1: Identify the contract(s) with the customer A contract can be oral, written or im plied by an entity's business practice. A contract with a customer will fall within the scope of IFRS 15 when all the following criteria are met: The parties to the contract have approved the contract; Each party's rights in relation to the goods or services to be transferred can be identified; The payment terms and conditions for the goods or services to be transferred can be identified; The contract has commercial substance; and The collection of an amount of consideration to which the entity is entitled to in exchange for the goods or services is probable. If the above criteria are met, a contract shall not be re-assessed unless there is an indication of a significant change in facts or circumstances, however if the contract does not meet the above criteria the entity will continue to re-assess the contract going forward to determine whether the criteria are subsequently met. STEP 1 Identify the contract(s) with the customer STEP 2 Identify the performance obligations in the contract STEP 3 Determine the transaction price STEP 4 Allocate the transaction price STEP 5 Recognise revenue when a performance obligation is satisfied Downloaded by Kristine Angelika Labonite ([email protected]) lOMoARcPSD|12116151
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