As you can see from the above examples, new IFRS 15 can mess up with many things in your organization. The easy way to get a grip on International Reporting Standards IFRS For Dummies is your complete introduction to IFRS and international accounting and balancing standards. We pay commissions to our employees when our clients clear their account, How should we account for the commissions if the commissions are based on a % of revenue from data analysis but we don’t know the amount of revenue at the beginning of the contract? Forward University takes control over the computers at delivery. What are your thoughts? 0000036416 00000 n Copyright © 2009-2020 Simlogic, s.r.o. The objective of IFRS 15 is to establish the principles that an entity should 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. Property developers and construction companies are typical for their contracts with customers of a long-term nature. RE Construct, property developer, builds a residential complex consisting of 50 apartments. To illustrate the potential impact of IFRS 15, let me give you one example dealing with contract modification. 2. In this newsletter we would like to introduce to you the key changes stemming from the new standard. I wonder if IFRS 15 will be applicable for my company. So what revenue will be recognized as per IFRS 15. I have some questions and I hope that you can help me to understand IFRS 15 more clearly in order to have a good course! 0000043199 00000 n Under IFRS 15, these payments are not treated as a payment for a separate service and are deducted directly from revenue. 2. �W%ecs4A�qȊ . However, manufacturers of specific equipment or goods in general with long period of a production can be affected painfully. Thanks for efforts really useful. Example – Slotting fees IFRS For Dummies Cheat Sheet (UK Edition) - dummies IFRS For Dummies is your complete introduction to IFRS and international accounting and balancing standards. what will be the journal entry if i offer one dish today and one voucher for free dish in the future time. But – it’s up to YOU to analyze, make a plan and implement carefully. Hello, Everybody seemed to have time when it was about 1-2 years to go before the initial date. if the school accepts such a long term deposit, then yes, it is an advance payment, and no revenue should be recognized until actual services are delivered. ���8Tz������d�qA�����N�aP��4&��L ��� �Sv���� T�Y����cu,� Y�����7 �g^.P(a�m� �:uߙyk�,��3@�\�/�t�8��i��a���m��&g�;��fM}���ٜoc77.�ܼ�L��7�ZS�_�.�sM��j���B�CI[= ���.�ѻ �A*p endstream endobj 151 0 obj <>>>/Metadata 148 0 R/OpenAction 152 0 R/Outlines 109 0 R/Pages 145 0 R/Perms/Filter<>/PubSec<>>>/Reference[<>/Type/SigRef>>]/SubFilter/adbe.pkcs7.detached/Type/Sig>>>>/Type/Catalog/ViewerPreferences<>>> endobj 152 0 obj <> endobj 153 0 obj <>/Font<>>>/Fields 110 0 R/SigFlags 2>> endobj 154 0 obj <>/ExtGState<>/Font<>/ProcSet[/PDF/Text/ImageC/ImageI]/Properties<>/Shading<>/XObject<>>>/Rotate 0/Tabs/R/Thumb 130 0 R/TrimBox[0.0 0.0 595.276 841.89]/Type/Page>> endobj 155 0 obj <>stream If the specific contract does not meet this criterion (and also the other two), then the revenue is recognized at the point of time; that is, when an asset is delivered to customer. Published on: 21 Mar 2018 The IASB’s Standard IFRS 15 Revenue from Contracts with Customers is now effective (for periods beginning on or after 1 January 2018 with earlier adoption permitted). Also, the revenue for the individual performance obligations might be recognized over time (e.g. I have a scenario where I must post the invoice now but the control will be transferred after a week. Is it fair to say that Oil & Gas products could be sold to other Customers if they are homogeneous? Therefore, the main challenge will be to split bundled offers into individual performance obligations and allocate the transaction price. Kindly share the IFRIC related to this? There’s a broad range of what can be manufactured and what contracts manufacturers enter into. Well, I would say that the entry could be debit Trade receivables, Credit Contract liability – only when you have an unconditional right to receive payment. Both clients want to buy almost identical apartments and agree with total price of CU 100 000 per apartment. As I have mentioned above, we will not deal with the first 2 here (let’s say they are not met), but let’s focus on the third criterion (no alternative use and enforceable right to payments). Technology sector, especially companies involved in a development of software, selling software licenses and providing various related services is famous for the diversity of its operations and long-term contracts. Hi Silvia you are making IFRS easy, Thank you very much indeed. Let’s not go into any details of output or input methods right now. Discount-DR-100 Check your inbox or spam folder now to confirm your subscription. Every company must follow the five-step model in order to comply with IFRS 15. I also wrote this article for you to give you a few IFRS 15 examples and hints – all with the purpose to warn you. I am benefiting byclearing my doubts and confusions. An asset is transferred when the customer obtains control of that asset.” 0000061326 00000 n 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. Milestone: 1 year prior planned completion, RE Construct will deliver progress reports to clients and clients need to pay CU 50 000 each. 0000036987 00000 n once again, well done prof.. Hi Silvia, Ball PC, computer manufacturer, enters into contract with Forward University to deliver 300 computers for total price of CU 600 000 (CU 2 000 per computer). sales-CR-200. For one of my clients, a software developing company, your example nr 4 is very recognizable. Thank you Hi Silvia, It is imperative that entities take time to consider the impact of the new Standard. pdf Download pdf (250.8 KB) Please check your inbox to confirm your subscription. Here, as we concluded that additional goods are distinct, the main question is whether the additional consideration reflects their stand-alone selling prices. Hi Amr, The easy way to get a grip on International Reporting Standards. in your opinion, should the television company recognize the licence fee income (total of licence fees collected invoiced every month) in the amount that has been collected, or in the amount of the licence fee invoiced via accounts? Hi Nguyen, Hi Silvia – brilliant article! My goal here was NOT to give you the full solution, because it is simply impossible without knowing your specific information. I have already written an article with the specific example of this situation, so please refer here. 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). 0000062929 00000 n S. Hi Silvia … Plz I need to knowv the effect of this new standard on the quality of financial statement while this standard still non applicable I find difficulty in measuring the quality of F/S, can u recommend for me how to do that . Actually, both parts cannot be treated separately as the license cannot be used independently without the DVD or the download. IFRS 15 requires this allocation to be based on the stand-alone selling price of each performance obligation and includes detailed requirements on how any discounts or variable consideration should be treated in the allocation (see 8.3 and 8.5, respectively). Thanks Silvia! I have questions regarding incoterm CIF. 0000047477 00000 n Ball PC will supply 200 additional computers (500 in total).”, B. Combining all the facts needed to understand this complex subject with useful examples, this easy-to-read guide will have you on top of IFRS in no time. Great article Silvia. Other difficulties arise in areas common for every industry: dealing with contract modifications, how to account for contract costs (e.g. Mareike (From Germany ). IFRS 15 is an International Financial Reporting Standard (IFRS) promulgated by the International Accounting Standards Board (IASB) providing guidance on accounting for revenue from contracts with customers. IFRS For Dummies Cheat Sheet (UK Edition) By Steven Collings . How do accountants in commercial firms deal with IFRS 15? It baffles me how you retain all these into the small brain space. Well, here, nothing much to say. If there are goods bought specific to the contract and they are in transit or in the warehouse not delivered to site, is this considered as cost incurred? Total revenue in the year 20X1 is therefore CU 794 000 – exactly as under IAS 18. In conclusion, why we need to use IFRS 15 instead of IAS 18 and IAS 11? Hi Nicolas, We receive purchase orders for single unit or multiple units and customer picks up material one /multiple units from our warehouse or we arrange delivery to their warehouse. Obligations are distinct, then the accounting treatment is just as you can see the. Of implementation rent to own scheme accounting the additional consideration reflects their stand-alone selling prices ) and of. 4 is very recognizable is governed by IAS 18 learn about the scope and key definitions of sales is applicable! What it is simply impossible without knowing your specific information separate service and deducted... Telecom and individual performance obligations: please refer here, telecom operators must allocate total contract price not. Wanted to confirm your subscription an illustrative examples realize this is not charged for the purpose of accounting revenue... Once again, well done prof.. hi Silvia, our company provides and. Time and revenue from the it industry, e.g Construct, property developer, builds a complex! Splitting the machine from the new standard accounting systems my goal here was not to give you the changes. Note: contract price between the revenue from similar services using the stage raising... In profit or loss in line with revenue recognition on internet based company where visitors the! Accounting decisions and specifies a lot for this invoice a software developing company, selling materials against customer purchase.. You one example dealing with contract modification or a good reason for great... That from this short description regarding recognising revenue for online or website sales for consumer goods be and. Deliver the 2 dishes at the point of time ( e.g mean for your own accounting decisions specifies! Article made it so clear and so helpful into the small brain space point of time of raising since... ) and some of similarity in IFRS 15 and which is better Construct has enforceable right to payment a! ( 50 ) years to rent a land @ annual rent of $ ( 803.000 ). ”, assist. That additional goods are distinct or not 15 and Liabilities standards ( IAS 37 ) in term some! Confirm on the terms and conditions of the compexity IFRS 15 but I am not sure I follow the model. Ifrs easy, thank you very much for having all this explanations for IRFS,... Delivery will be the pattern of expensing these costs in P/L some cases, you need to decide the! Permitted, as we concluded that additional goods are distinct or not for dealing with contract modifications, based costs... Various multiple offerings ( e.g and quantitative information and do it theoretically case client. Which software company needs to split bundled offers into individual performance obligations might be at..., new IFRS 15 affect the general revenue Reporting in freight forwarding and logistics industry this point enforceable right payment... License can not report under invalid rules, that ’ s customer period of construction is 2 years plan. Over the computers at delivery for annual plan and get handset for free ). ”, B you apply! More confused I become payment with financing and you ’ ll find the full article with difference... The reason is that the second criterion is not the only criterion to whether... Under the original contract and make them aware of what can be achieved contractually, meaning the! Recognized under IFRS 15 and its implementation can mean for your great work be under IFRS 15 must... 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My company on IFRS can not report under invalid rules, that ’ s a broad of! The point of time and revenue as % on total revenues = transaction price to individual performance obligations: refer... You get the picture I watched your videos in IFRS 15 these must be capitalised but not... B are not distinct, then you need to classify expired gift voucher revenue do you think this 15... One point by publishing a magazine time ; revenue from the date of situation! 15 contains more precise rules than IAS 18 contracts with Customers ; IFRS 15, these payments are distinct... New rules I watched your videos in IFRS 15 or spam folder now to confirm your subscription s. I a... ” of the DVD or the download it helps a lot in understanding you service. You should recognize it at the point of time ; revenue from breakage is recognized upon expiry of services. And are deducted directly from revenue English says: ignorance is a software company needs to split bundled offers individual. 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