IFRS15 – a key note
to implementation
Overview of IFRS15
IFRS 15 specifies how and when an
IFRS reporter will recognise revenue as well as requiring such entities to
provide users of financial statements with more informative, relevant
disclosures. The standard provides a single, principles based five-step model
to be applied to all contracts with customers.
IFRS 15 was issued in May 2014
and applies to an annual reporting period beginning on or after 1 January 2018.
On 12 April 2016, clarifying amendments were issued that have the same
effective date as the standard itself.
Superseded Standards
IFRS 15 replaces the following standards and
interpretations:
·
IAS 11 Construction contracts
·
IAS 18 Revenue
·
IFRIC 13 Customer Loyalty Programmes
·
IFRIC 15 Agreements for the Construction of Real
Estate
·
IFRIC 18 Transfers of Assets from Customers
·
SIC-31 Revenue - Barter Transactions Involving
Advertising Services
Scope
IFRS 15 Revenue from Contracts
with Customers applies to all contracts with customers except for: leases
within the scope of IAS 17 Leases; financial instruments and other contractual
rights or obligations within the scope of IFRS 9 Financial Instruments, IFRS 10
Consolidated Financial Statements, IFRS 11 Joint Arrangements, IAS 27 Separate
Financial Statements and IAS 28 Investments in Associates and Joint Ventures;
insurance contracts within the scope of IFRS 4 Insurance Contracts; and
non-monetary exchanges between entities in the same line of business to
facilitate sales to customers or potential customers. [IFRS 15:5]
A contract with a customer may be
partially within the scope of IFRS 15 and partially within the scope of another
standard. In that scenario: [IFRS 15:7]
·
if other standards specify how to separate
and/or initially measure one or more parts of the contract, then those
separation and measurement requirements are applied first. The transaction
price is then reduced by the amounts that are initially measured under other
standards;
·
if no other standard provides guidance on how to
separate and/or initially measure one or more parts of the contract, then IFRS
15 will be applied.
Accounting
requirements for revenue: The five-step model framework
The core principle of IFRS 15 is
that an entity will recognise revenue to depict the transfer of promised goods
or services to customers in an amount that reflects the consideration to which
the entity expects to be entitled in exchange for those goods or services. This core principle is delivered in a
five-step model framework: [IFRS 15:IN7]
·
Identify the contract(s) with a customer
·
Identify the performance obligations in the
contract
·
Determine the transaction price
·
Allocate the transaction price to the
performance obligations in the contract
·
Recognise revenue when (or as) the entity satisfies
a performance obligation.
Magnitude of Impact on Various industries
Sr #
|
Industry
|
Impact
|
1
|
Automotive
|
High
|
2
|
Software
|
High
|
3
|
Healthcare & Pharma
|
Medium
|
4
|
Media
|
Medium
|
5
|
Energy
|
Low
|
6
|
Real Estate
|
Medium
|
7
|
Construction & Engineering
|
Medium
|
8
|
Retail
|
Low
|
9
|
Transportation & Logistics
|
Low
|
10
|
Telecommunication
|
High
|
Other Key impacts
·
Disclosures are affected
·
Staff & Education needed
·
Review of all contracts is required
·
Assessment of collectability
·
Time value of money
Implementation
Strategy:
Project Approach:
