Revenue from contracts with customers

meyer cohn
Mind Map by meyer cohn, updated more than 1 year ago
meyer cohn
Created by meyer cohn about 5 years ago
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IFRS 15 Revenue

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Revenue from contracts with customers
1 Step 1: Identifying the contract
1.1 Shall account for a contract with customer when ALL of following criteria are met: 1. parties approved the contract and committed; 2. can ID each party's rights; 3. ID payment terms; 4. contract has commercial substance; 5. probable that entity will collect the consideration.
1.2 If contract does not meet criteria, entity recognise consideration received as revenue only when either: 1. entity has no remaining obligation to transfer goods & consideration is non-refundable; or 2. contract is terminated & consideration non-refundable
1.3 Combination of contracts
1.3.1 When 2/more contracts near and with same time & customer/related party as a single contract if criteria are met: 1. single commercial; 2. consideration of 1 contract depends on performance of other; 3. goods are a single performance obligation.
1.4 Contract modifications
2 Step 2: Identifying performance obligations (PO)
2.1 At inception entity assess G/S promised in contract, & ID as a PO each promise to transfer to customer either: 1. G/S is distinct; OR 2. Series of distinct G/S have same pattern of transfer to customer.
2.2 Promises in contract
2.2.1 PO not limited to G/S, IF promise is implied, or business practice or policy will = Promise in contract.
2.3 G/S promised are distinct IF: 1. customer benefits; & 2. Promise is separately ID frm other promises
3 Step 3: Determining transaction price (TP)
3.1 Consider terms & business practices to determine TP
3.2 TP is amount the entity expects to be entitled to, excl. amounts collected on behalf of 3rd parties
3.3 Variable consideration
3.3.1 Estimating by use of "expected value" method (probability-weighted method)
3.3.2 OR, estimating by use of "most likely amount"
3.4 a Significant financing component
3.4.1 Adjust promised amount for effects of time value of money
3.4.2 Relevant facts: the difference between promised amount & cash selling price; effect of time between transfer of G/S & PMT and market interest rate.
3.5 Non-cash consideration
3.6 Consideration payable to customer (eg. vouchers/coupons)
4 Step 4: Allocating the TP to performance obligation (PO)
4.1 Objective to allocate an amount that depicts amount entity expects to be entitled in exchange
4.2 Allocation based on stand-alone selling prices
4.2.1 Determine S-A SP at contract inception for distinct G/S for each PO & allocate TP in proportion to S-A SP
4.2.1.1 Methods for estimating S-A SP: 1. Adjusted market assessment; 2. Expected cost + margin; 3. Residual.
4.3 Applies only to contracts with more than 1 PO
5 Step 5: Recognise revenue
5.1 When entity satisfies a PO by transferring a promised G/S to Customer. Asset is transferred when Customer obtains CONTROL over asset.
5.2 PO satisfied over time
5.2.1 if one of criteria met: 1. Customer simultaneously receives & consumes; 2. Performance enhances customer's asset; 3. Performance do not create asset with alternative use & enforceable right to PMT at completion.
5.3 PO at point in time
5.3.1 Transfer of control/ present right to PMT = point in time
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