Dr. Antony Michail
Nov 6, 2018

IFRS 15, Revenue from contracts with customers – Boutique treats on performance obligations and revenue recognition, Part I

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First Published: IFRS Boutique

Date: 16 February 2018

By: Chris Ragkavas, BA, MA, FCCA, CGMA

StudySmart management consultant, senior finance & accounting tutor, IFRS technical expert

 

 

Performance obligations are contractual commitments that the reporting entity must comply with, in order to be entitled to consideration. Even if a good or service is agreed to be given/rendered free of charge, consideration must be allocated to it. We will deal with this last point, in another article.

 

How are POs classified? POs are either:

  1. A good or service (or a bundle of goods or services) that is distinct;

  2. series of distinct goods or services that are substantially the sameand have the same pattern of transfer to the customer. ​

 

A good or service is distinct, if:

 

READ MORE

 

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  • IFRS 15, Revenue from contracts with customers – Boutique treats on performance obligations and revenue recognition, Part II - READ MORE

  • IFRS 15, Revenue from contracts with customers – Boutique treats on performance obligations and revenue recognition, Part III – READ MORE

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New Posts
  • Dr. Antony Michail
    Nov 6, 2018

    First Published: IFRS Boutique Date: June 2018 By: Chris Ragkavas, BA, MA, FCCA, CGMA StudySmart management consultant, senior finance & accounting tutor, IFRS technical expert When an entity enters into a contract including more than one POs, the total agreed consideration, may be different to the sum of the considerations that would have been agreed, for each individual PO. Proper allocation of the TP to different POs is essential, especially when some POs are satisfied over time and some at a point in time, affecting the amount of revenue to be recognized in different accounting periods. Moreover, entities need to allocate part of the TP to POs that are contractually satisfied free of charge, as practically  no PO is taken to be satisfied under IFRS 15 for  no consideration . Entities must allocate the TP to the POs, based on the  stand-alone selling price  (henceforth SSP) of each PO. In our examples below, we assume that the SSPs are the price at which the entity would sell each good/service separately to a customer, as alternative methods are beyond the scope of this article. READ MORE Related Articles · IFRS 15, Revenue from contracts with customers – Boutique treats on performance obligations and revenue recognition, Part I – READ MORE · IFRS 15, Revenue from contracts with customers – Boutique treats on performance obligations and revenue recognition, Part II - READ MORE · IFRS 15, Revenue from contracts with customers – Boutique treats on performance obligations and revenue recognition, Part III – READ MORE
  • Dr. Antony Michail
    Nov 6, 2018

    First Published: IFRS Boutique Date: June 2018 By: Chris Ragkavas, BA, MA, FCCA, CGMA StudySmart management consultant, senior finance & accounting tutor, IFRS technical expert Determining the transaction price The transaction price is the amount of consideration in a contract to which an entity expects to be entitled in exchange for transferring promised goods or services to a customer. The transaction price can be a fixed amount of customer consideration, but it may sometimes include variable consideration or consideration in a form other than cash. Consideration may be variable due to price concessions, volume discounts, rebates, early settlement discounts, performance bonuses or other similar items.  The standard compels entities to recognize revenue even when it is variable, i.e. even if there is a degree of uncertainty with regards to the final amount that will be recognized, once the reason for the variability is resolved. READ MORE Related Articles · IFRS 15, Revenue from contracts with customers – Boutique treats on performance obligations and revenue recognition, Part I – READ MORE · IFRS 15, Revenue from contracts with customers – Boutique treats on performance obligations and revenue recognition, Part II - READ MORE · IFRS 15, Revenue from contracts with customers – Boutique treats on performance obligations and revenue recognition, Part IV – READ MORE
  • Dr. Antony Michail
    Nov 6, 2018

    First Published: IFRS Boutique Date: June 2018 By: Chris Ragkavas, BA, MA, FCCA, CGMA StudySmart management consultant, senior finance & accounting tutor, IFRS technical expert When and how, is revenue recognized? Revenue is recognized when POs are satisfied. This is done either: 1. Over time, i.e. gradually; or, 2. At a point in time, on a specific date. The standard’s approach is to determine whether there are indications that the PO is satisfied  over time .  If  none  are found, then the POs are satisfied at a point in time. READ MORE Related Articles · IFRS 15, Revenue from contracts with customers – Boutique treats on performance obligations and revenue recognition, Part I – READ MORE · IFRS 15, Revenue from contracts with customers – Boutique treats on performance obligations and revenue recognition, Part III – READ MORE · IFRS 15, Revenue from contracts with customers – Boutique treats on performance obligations and revenue recognition, Part IV – READ MORE

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