Thank you, Paul 🙂 Good luck with your clients – IFRS 15 is a great consulting scope, I believe. Milestone: 1 year prior planned completion, RE Construct will deliver progress reports to clients and clients need to pay CU 50 000 each. Everybody seemed to have time when it was about 1-2 years to go before the initial date. Actually, both parts cannot be treated separately as the license cannot be used independently without the DVD or the download. IFRS 15 sets out a single and comprehensive framework for revenue recognition, The guidance in IFRS 15 is considerably more detailed than existing IFRSs for revenue recognition (IAS 11 Construction Contracts and IAS 18 Revenue and associated Interpretations), including extensive application guidance and illustrative examples. Have a nice day! 10 ans après l’entrée en vigueur des IFRS en Europe, de nouveaux changements majeurs sont en ligne de mire pour toutes les entreprises, quelles que soient leurs activités ! Contents IFRS 15 Revenue from Contracts with Customers Illustrative Examples IE1 Identifying the contract IE2 - IE17Contract modifications IE18 - IE43Identifying performance obligations IE44 - IE65A My assessment is that the aforementioned are outof scope under IFRS 15 . We need to assess 3 criteria for recognizing revenue over time. Also note, that under IAS 11, you would probably account for both contracts in the same way (as for contract B), but NOT under IFRS 15. S. hi silvia , please send me article about what is the difference between revenues before and after ifrs 15 and which is better ? Currenlty, we put it in account name “Recipt in advance” and amortise to income staterment monlty. You are not required by IAS 18 to examine whether this additional delivery reflects stand-alone selling prices or not. if gift voucher has no expiry period, then you account for its sale as Debit Cash/Credit Contract Liability; and when someone pays you for goods with that voucher, then Debit Contract Liability/Credit Revenue from Sale of goods. As a result, maybe you would need to carefully incorporate time value of money into some long-term advances received or paid, or contracts settled after more than 12 months. What if the second criterion is met instead of the third one? S. Always enjoy reading your articles, they help me as I have to educate staff at my company on IFRS. Total contract price is CU 12 million. sign up for annual plan and get handset for free). To help you cope with IFRS 15, I am preparing totally new videos to my premium learning package IFRS Kit (under construction), but I also speak and discuss on LIVE events. IAS 18 requires recognizing revenue from similar services using the stage of completion including post-delivery services. At the same time, customer is obliged to pay for work completed to date in the reasonable amount. After I wrote a couple of articles about IFRS 15 here and here, and after I discussed with some of my friends CFOs or auditors, there are two types of reactions: Please, be the exception and stand out from the crowd. La parution d’IFRS 15 en mai 2014 s’accompagne d’un recueil de 63 exemples pour illustrer les conséquences pratiques attendues. Big Bed enters in a contract with a customer to sell beds for $400 per bed on 1 January 2017. is it right treatment for above mentioned case? it depends on what it is. Well, here, nothing much to say. Could you tell me the advantages of IFRS 15 in comparison with IAS 18 and IAS 11. If this is the case, the revenue is recognised over time even when there’s no enforceable right to payment for the performance up to date. The consideration agreed in the contract modification. Paul. Thanks. well done. Moreover, the applicable date of this standard will be postponed by 1 year. =(. Dear Miss Fairuz, It baffles me how you retain all these into the small brain space. Now that you have made my life easy, I can understand the new accounting standards in a fast & easy manner. Thanks in advance ya!=). I wonder if IFRS 15 will be applicable for my company. Thank you for the correction, of course, it should have been vice versa and I’ll correct it. Hi Silvia, I have one question related to machine sales and progress invoicing based on the following milestones: Hi silviya, For construction company accounting, under IFRS15, Will the Percentage of Completion sheet change. The reason is that the school has not delivered any performance obligations yet (or I guess so). 2 years subscription plan), or at the point of time (e.g. Example: A series of distinct goods or services that are substantially the same. RE Construct will keep ONLY the progress payments in the case of client’s default and they may not cover entity’s cost for work completed to date. IFRS 15 states very precise and detailed guidance on whether the goods or services promised under the contract are distinct and whether they can be considered separate performance obligations or not. If the revenue is recognised over time according to IFRS15. post implementation support). Be aware of what IFRS 15 and its implementation can mean for your company and prepare early enough. NEW: Online Workshops – US GAAP, IFRS and other. S. Is there any calculation error in the above example as in the question you mentioned the Cost Breakup as CU 38000 and CU 7000, however you took in workings the Cost Break up as CU 43000 and CU 2000. Amr. thank you for your amazing and clear articles, may I ask you if there is an article explain the transportation costs issue, I experienced that some companies put this expenses as a deduction from sales and some others deal with it as S&D expenses, and also the fixed rebate to customer that not related to variable sales(Target) its absolute number per year whether sales is 1 dollar or million dollar. How it’s going to impact a trading company, selling materials against customer purchase orders . [IFRS 15:50] Variable consideration can arise, for example, as a result of discounts, rebates, refunds, credits, price concessions, incentives, performance bonuses, penalties or other similar items. Contracts can be written, oral or implied by an entity’s customary business practices. For example, if the fare was £30 and the commission is £3, under IFRS 15 the £3 pound will be accounted as turnover ad the £27 posted to cost of sales. If yes, then you need to split the revenue based on their relative stand-alone selling prices and recognize revenue for a machine when you deliver it and the revenue for the installation when you install the machine. 1. Is it fair to say that Oil & Gas products could be sold to other Customers if they are homogeneous? Illustrative Examples IFRS 15 Revenue from Contracts with Customers. Kindly share the IFRIC related to this? Is modified retrospective method acceptable in a Giant Multinational Company ? You simply cannot report under invalid rules, that’s why. Le trait d'union entre la communauté du droit des affaires et les entreprises, IFRS 15 reconnaissance du chiffre d’affaires, Option Finance - 07 juillet 2014 - Hugues de Noray. Other difficulties arise in areas common for every industry: dealing with contract modifications, how to account for contract costs (e.g. How should Ball PC account for the revenue from this contract for the year ended 31 December 20X1 if: As of 31 December 20X1, Ball PC delivered 400 computers (300 as agreed initially and 100 under the contract amendment). I understand because people chip & pin or use contactless mode of payment , it means that risks have not passed to the taxi company and hence it should only recognise the margin bit as turnover and the other part as cost of sales as it has to pay the driver. Second one ..also in this example,,, why you take the transaction price in calculating revenue over time in contract B ? See Examples 7, 13, 25 accompanying IFRS 15 and the examples below. Payments against this delivery will be on agreed payment terms. S. Good day. Please enlighten me. Thanks for the examples above. Let’s calculate: Here you can clearly see that in this second scenario (additional delivery with 30% discount): Yes, sure. However, if the distinct goods or services are added but not at stand-alone selling price, this is a modification of an existing contract, but is essentially treated as a termination of the existing contract and the start of a new contract (IFRS 15.21(a)) as it is treated prospectively. 2. Should we consider the transfer of control point to be when the goods are handed over to the courier company or when the goods are actually delivered to the end user. All the best! I also wrote this article for you to give you a few IFRS 15 examples and hints – all with the purpose to warn you. No, there’s no mistake – I wrote WARNING intentionally. Don’t make the same mistake and start NOW. Costs relating to satisfied performance obligations and costs related to inefficiencies should be expensed as incurred. Hi Amr, If the revenue is to be recognized over time, how should the company, Do you incur certain costs for obtaining the contract, like, Additional goods and services in the modification must be, Amount of consideration expected for the additional goods/services must. Completion: Upon the completion of the construction, the legal ownership to apartments is transferred to clients and they pay the remaining amount of CU 40 000 each. Hi Sylvia, Hi Henk, Hi Nicolas, IFRS 15 also includes guidance related to contract costs. We are also preparing the start of IFRS15 and we as machine builders are now splitting the machine from the installation. Can you please kindly advise when revenue should be recognized under IFRS 15? What IFRS 15 impacts them, dans son ensemble, pourront être dans! Articles… ) amend the contract scope, I am currently just a student and have the limit about. Easily sold or transferred to another client in case of client a does not.! 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