IFRS 15 Revenue

IFRS 5 step for revenue recognition

1. Identify contract

2. Identify performance obligations

3. Determine transaction price

4. Allocate transaction price

5. Recognize revenue

Attributes of contracts (5)

1. Approved by all

2. Identifiable rights

3. identifiable payment terms

4. commercial substance

5. probable collection

Combining contract criteria (1 of 3 met)

negotiated as a package

consideration linked for both

single performance obligation

Modifying contract criteria (2) and outcomes

1. Change in scope

2. Price increases by level of separate good

   Outcomes: termination, continuation, or mixed

Step 2: Identifying performance obligation

Promise to transfer goods/series that are distinct

consider implicit nature of transaction based on business practices

consider incentives and upfront fees

Distinct goods criteria (2)

1. Customer can benefit from good alone

2. Promise to transfer is separately identifiable

Step 3: Determine the transaction price

Amount of consideration that a seller expects to be entitled to in exchange, net of tax

Considerations for determining price (5)

1. Variable consideration - expected (probability weighted) vs most likely amount

2. Right of return - recognize when uncertainty is resolved

3. Significant financing - discount future payments if >1 year, eff. rate

4. non-cash consideration - if goods are in line of business revenue, or else PPE

5. consideration payable

Step 4: Allocate transaction price

Reflect value to seller that is received once each obligation is performed

Allocate discounts unless criteria are met (all): regularly sells goods on stand alone basis, regular sale on discount, discount same as what seller offers to other customers (evidence it belongs to one item)

Step 5: Recognize revenue

Where transaction price has been allocated, recognize revenue as obligations are met

Performance obligation over time

Customer receives and consumes benefit (weekly cleaning

performance leads to betterment for customer

seller created unique good and has enforceable right to payment