The document discusses the key changes and challenges in implementing the new revenue recognition standard Ind AS 115, which is based on IFRS 15. Some of the significant changes include focusing on control rather than risks and rewards for timing of revenue recognition. It also requires identifying separate performance obligations in contracts and allocating the transaction price to each. This will impact industries like telecom and software development. Other challenges discussed are accounting for contract modifications and transactions containing financing elements.
Revenue Recognition In IFRS By Yash BatraYash Batra
Detailed Presentation on revenue recognition as per IFRS. Accounting on revenue recognition is critical especially when World has defined path to follow IFRS accounting and reporting of its financial. I have tried to capture all critical aspects of revenue recognition in this presentation.
Revenue Recognition In IFRS By Yash BatraYash Batra
Detailed Presentation on revenue recognition as per IFRS. Accounting on revenue recognition is critical especially when World has defined path to follow IFRS accounting and reporting of its financial. I have tried to capture all critical aspects of revenue recognition in this presentation.
IFRS 15 - the new revenue recognition standard EY Belgium
The IASB and the FASB have jointly issued a new revenue standard, IFRS 15 Revenue from Contracts with Customers, which will replace the existing IFRS and US GAAP revenue guidance.Find out more in our comprhensive brochure.
CA Varun Sethi IndAS 115 - Revenue from contracts with customers - sale or ...Varun Sethi
CA Varun Sethi IndAS 115 - Revenue from contracts with customers - sale or return: Indian Financial Reporting
India has decided to converge EARLY with IFRS 15 - Revenue from Contracts with Customers. Accordingly, MCA hasn't notified any IndAS 11 and IndAS 18 which are converged to IAS 18 on Revenue recognition.
Ind AS 115 (converged with IFRS 15) - Revenue from Contracts with Customers deals with reveue recognition.
Accounting Standard (AS) 9 - Revenue Recognition prescribes accounting for revenue.
The presentations deals specifically with the accounting for Revenue for sale of goods with right of return. It compares the accounting under IAS 18 with IFRS 15/ IndAS 115 with example and summarizes the net impact.
Sector impacted:
1. FMCD/FMCG companies,
2. B2B/ B2C Businesses
3. Ecommerce/ Distributor/retail & consumer companies
with 'No questions asked return/refund policies'
Implementing IFRS 15: The new revenue recognition standardAnne-Marie Bisset
Implementing the new revenue standard, IFRS 15 Revenue from contracts with customers, will be a significant conversion project with significant impact for businesses.
Original air dates:
May 27, 2014 and June 12, 2014
The FASB's new standard on revenue recognition will impact most companies and their internal accounting practices. Are you ready? This new standard for revenue recognition does away with industry guidance in favor of a single contract based model. This will result in significant changes in internal accounting practices for virtually all industries. During this webinar, experts from CBIZ and Mayer Hoffman McCann will discuss requirements of the new standard; the implications of the standard to your business; and timing of the implementation.
IASB’s predecessor body has issued BAS 11 Construction Contracts [1979] & BAS 18 Revenue [1982] & SIC 31 Revenue - Barter Transactions Involving Advertising Services, IFRIC 13 Customer Loyalty Programmes, IFRIC 15 Agreements for the Construction of Real Estate & IFRIC 18 Transfers of Assets from Customers
All the above mentioned standards cover their own areas & were revised subsequently. In order to address the concern/gap (risen time to time), specific guidelines through SIC & IFRIC were issued. IASB (and its predecessor) had relentlessly employed efforts to prescribe proper accounting treatments in these areas. There was understood gap with related GAAP issued by FASB. Finally IASB has undertaken project to bring convergence with FASB pronouncement/GAAP & integrate different standards in June 2002. After long time & due course of study of different accounting pronouncements/GAAP issued by various national/international standards setter/regulatory guidelines applied in different political boundary, knowledge sharing with different standards setters across the globe, inviting & consideration of comments from interested group, meeting with expert group/researcher, IASB has finally issued IFRS 15 in May 2014.
Overview of BFRS 15
BFRS 15 specifies more specifically:
- how and when an entity shall recognise revenue;
- require entities to provide users of financial statements with more informative, relevant disclosures; and
- provides a single, principles based five-step model to be applied to all contracts with customers
The package of improvements introduced by BFRS 15 includes:
- a methodical approach (how);
- a principle oriented guideline on timing (when);
- more disclosure with specific & decisive information; and
- a substantially a single, principles based five-step model
[similar approach of FASB pronouncement few often adopted by IASB under Norwalk agreement of convergence between standards issued by two major bodies (IASB & FASB)]
BFRS 15 is expected to assist user more specifically with directive & guidelines to cater the new/changed pattern of business & evolution (since issuance of BAS 18, BAS 11 & others IFRIC & SIC). This new standard shall assist prepares/reviewer of financial statements with detail guidelines to encounter the prevailing gap which was not exhaustively covered through existing standards. Surely this standards shall bring together all aspects of:
- The accounting of revenue from contracts; and
- Qualitative disclosure
Together with these above mentioned improvements/changes in BFRS 15, will enhance the credibility of financial statements & better understanding by the users.
IASB stand that the new Standard will enhance investor confidence in regard to revenue and the financial system as a whole
FASB Proposals Affecting Government ContractorsDecosimoCPAs
Robert Belcher and Ken Conner co-presented this PowerPoint at the 2012 RocketCity GovCon Conference hosted by Solvability in Huntsville, Ala. on Sept. 20, 2012.
IFRS 15 – What are the five steps of (Financial Reporting) IFRS 15?Zabeel Institute
Using IFRS 15, an entity acknowledges revenue to illustrate the transfer of guaranteed products or services to the client in a quantity that reflects the consideration to which the entity anticipates to be qualified in exchange for those products or solutions.
IFRS 15 - the new revenue recognition standard EY Belgium
The IASB and the FASB have jointly issued a new revenue standard, IFRS 15 Revenue from Contracts with Customers, which will replace the existing IFRS and US GAAP revenue guidance.Find out more in our comprhensive brochure.
CA Varun Sethi IndAS 115 - Revenue from contracts with customers - sale or ...Varun Sethi
CA Varun Sethi IndAS 115 - Revenue from contracts with customers - sale or return: Indian Financial Reporting
India has decided to converge EARLY with IFRS 15 - Revenue from Contracts with Customers. Accordingly, MCA hasn't notified any IndAS 11 and IndAS 18 which are converged to IAS 18 on Revenue recognition.
Ind AS 115 (converged with IFRS 15) - Revenue from Contracts with Customers deals with reveue recognition.
Accounting Standard (AS) 9 - Revenue Recognition prescribes accounting for revenue.
The presentations deals specifically with the accounting for Revenue for sale of goods with right of return. It compares the accounting under IAS 18 with IFRS 15/ IndAS 115 with example and summarizes the net impact.
Sector impacted:
1. FMCD/FMCG companies,
2. B2B/ B2C Businesses
3. Ecommerce/ Distributor/retail & consumer companies
with 'No questions asked return/refund policies'
Implementing IFRS 15: The new revenue recognition standardAnne-Marie Bisset
Implementing the new revenue standard, IFRS 15 Revenue from contracts with customers, will be a significant conversion project with significant impact for businesses.
Original air dates:
May 27, 2014 and June 12, 2014
The FASB's new standard on revenue recognition will impact most companies and their internal accounting practices. Are you ready? This new standard for revenue recognition does away with industry guidance in favor of a single contract based model. This will result in significant changes in internal accounting practices for virtually all industries. During this webinar, experts from CBIZ and Mayer Hoffman McCann will discuss requirements of the new standard; the implications of the standard to your business; and timing of the implementation.
IASB’s predecessor body has issued BAS 11 Construction Contracts [1979] & BAS 18 Revenue [1982] & SIC 31 Revenue - Barter Transactions Involving Advertising Services, IFRIC 13 Customer Loyalty Programmes, IFRIC 15 Agreements for the Construction of Real Estate & IFRIC 18 Transfers of Assets from Customers
All the above mentioned standards cover their own areas & were revised subsequently. In order to address the concern/gap (risen time to time), specific guidelines through SIC & IFRIC were issued. IASB (and its predecessor) had relentlessly employed efforts to prescribe proper accounting treatments in these areas. There was understood gap with related GAAP issued by FASB. Finally IASB has undertaken project to bring convergence with FASB pronouncement/GAAP & integrate different standards in June 2002. After long time & due course of study of different accounting pronouncements/GAAP issued by various national/international standards setter/regulatory guidelines applied in different political boundary, knowledge sharing with different standards setters across the globe, inviting & consideration of comments from interested group, meeting with expert group/researcher, IASB has finally issued IFRS 15 in May 2014.
Overview of BFRS 15
BFRS 15 specifies more specifically:
- how and when an entity shall recognise revenue;
- require entities to provide users of financial statements with more informative, relevant disclosures; and
- provides a single, principles based five-step model to be applied to all contracts with customers
The package of improvements introduced by BFRS 15 includes:
- a methodical approach (how);
- a principle oriented guideline on timing (when);
- more disclosure with specific & decisive information; and
- a substantially a single, principles based five-step model
[similar approach of FASB pronouncement few often adopted by IASB under Norwalk agreement of convergence between standards issued by two major bodies (IASB & FASB)]
BFRS 15 is expected to assist user more specifically with directive & guidelines to cater the new/changed pattern of business & evolution (since issuance of BAS 18, BAS 11 & others IFRIC & SIC). This new standard shall assist prepares/reviewer of financial statements with detail guidelines to encounter the prevailing gap which was not exhaustively covered through existing standards. Surely this standards shall bring together all aspects of:
- The accounting of revenue from contracts; and
- Qualitative disclosure
Together with these above mentioned improvements/changes in BFRS 15, will enhance the credibility of financial statements & better understanding by the users.
IASB stand that the new Standard will enhance investor confidence in regard to revenue and the financial system as a whole
FASB Proposals Affecting Government ContractorsDecosimoCPAs
Robert Belcher and Ken Conner co-presented this PowerPoint at the 2012 RocketCity GovCon Conference hosted by Solvability in Huntsville, Ala. on Sept. 20, 2012.
IFRS 15 – What are the five steps of (Financial Reporting) IFRS 15?Zabeel Institute
Using IFRS 15, an entity acknowledges revenue to illustrate the transfer of guaranteed products or services to the client in a quantity that reflects the consideration to which the entity anticipates to be qualified in exchange for those products or solutions.
CA Varun Sethi - IndAS 102 - IFRS 2 - Share based payments - Accounting for M...Varun Sethi
Presentation by CA Varun Sethi :
Explains through flowboxes - IndAS 102 - IFRS 2 - Share based payments - especially
1. Accounting for modification or settlements of SBP and
2. SBP among group employees
Greater and better coverage, and message it carries for self learning.
Topics Covered
Overiew of Entire Model GST Law
Budget 2017 and lot more.
Happy Reading
Team GSTIndAS
Guide to First Time Adoption of Ind AS 109Ernst & Young
Read the salient features of IND AS 109 roadmap noticed by the MCA & the practical issues and perspective. For more details, visit http://bit.ly/1KZGlHY.
IFRS 2 requires an entity to recognise share-based payment transactions in its financial statements. Equity-settled share-based payment transactions are generally those in which shares, share options or other equity instruments are granted to employees or other parties in return for goods or services.
Mr. Chander Sawhney, Partner & Head – Valuation & Deals, Corporate Professionals shared his thoughts as a guest Speaker on Valuation Principles & Techniques in Ind AS at a seminar organised by Gurgaon Branch of ICAI on 3rd September, 2016.
IndAS113 prescribes Fair Valuation definition, Techniques, Application and its Hierarchy. About 75% of the Balance Sheet Size is expected to change due to Fair Value Accounting (#IndAS109 #Financial Instruments, #IndAS102 #Share based payments, #IndAS16 Property Plant Equipments (PPE), #IndAS103 #Business combination etc. shall be impacted using #FairValue. Time to get ready, Plan Prepare and Align with the new requirements...
About Corporate Professionals Valuation Practice
Corporate Professionals Capital Pvt. Ltd. is a SEBI Registered (Cat-1) Merchant Banker and has a successful track record of providing a broad range of M&A and Transaction Advisory Services. Our Dedicated Team has more than 10 years of rich Valuation experience and we have executed more than 500 Corporate Valuations for clients of International Repute across different Context, Industries and Boundaries.
To know more about Our Valuation offerings and how we can help you, please visit us at www.corporatevaluations.in or download our Valuation profile @ http://www.corporatevaluations.in/VALUATION_PROFILE.pdf
IFRS 15 Revenue from Contracts with Customerssilsarthur91
In May 2014, almost 12 years since the work begun, the new standard on revenue recognition IFRS 15 Revenue from Contracts with Customers was published. The aim of this article is to present the key aspects of the new revenue recognition in a light and accessible way as well as to help in systematic preparation for the upcoming changes.
Annual update course covering:
IFRS 15 Revenue from Contracts with Customers
IFRS 16 Leases
IFRICs 22 Foreign Currency Transactions and Advance Consideration
IFRIC 23 Uncertainty over Income Tax Treatments
Amongst other updates to standards during the past year.
Revenue recognition
Academic Resource Center
Revenue recognition Page 2
General
► This new guidance will supersede almost all existing revenue guidance under US
GAAP (including industry guides) and IFRS.
► The AICPA has formed various industry task forces to help develop non-authoritative
guidance.
► The FASB and IASB announced the formation of a joint transition resource group
(TRG) that will be responsible for informing the Boards about interpretive issues that
arise as companies implement the revenue standards. The TRG will not issue
guidance.
The FASB and IASB issued new guidance on accounting for revenue
recognition, Revenue Recognition – Revenue from Contracts with
Customers.
► FASB – ASC 606 (ASU 2014-09)
► IASB – IFRS 15
May 2014
Academic Resource Center
Revenue recognition Page 3
General
► ASC 606 applies to both public and non-public entities. For non-public entities, there is
some specific relief related to disclosures, transition and the effective date.
► At the December 5, 2016 AICPA National Conference on Current SEC and PCAOB
Developments, Sylvia E. Alicea, a professional accounting fellow of the office of the chief
accountant (OCA) made the following comments:
“SAB Topic 13 will continue to apply to registrants prior to their adoption of the new
revenue standard so it will continue to be relevant until all registrants have completed their
transition. New guidance will be provided, as needed. However, when OCA evaluates
implementation-related consultations under U.S. GAAP, our starting point is the new
revenue standard (and any subsequent amendments) as issued by the FASB. Therefore, I
believe registrants should also apply that model (as opposed to SAB Topic 13) when
evaluating their revenue arrangements for adoption of Topic 606.”
► IFRS 15 does not specifically apply to non-public entities. These non-public entities may
apply IFRS for Small and Medium-Sized Entities.
Academic Resource Center
Revenue recognition Page 4
Effective date and adoption methods
US GAAP
► For US public entities, certain not-for-profit entities and
certain employee benefit plans, the guidance is effective
for annual periods beginning after December 15, 2017.
Early adoption is permitted for annual periods beginning
after December 15, 2016.
► All other US entities are required to apply the standard to
annual periods beginning after December 15, 2018 but
can also early adopt beginning after December 15, 2016.
IFRS
► The guidance is effective for annual
periods beginning on or after
January 1, 2018.
► Early adoption is permitted. Early
adoption was permitted when IFRS
15 was originally issued.
The adoption methods available for both US GAAP and IFRS include the full retrospective approach
and the modified retrospective approach. These are further explained on the following slide.
Academic Resource Center
Revenue recognition Page 5
Effective date and adoption methods
Key .
Lease accounting received an accounting overhaul with the recent release of the Financial Accounting Standards Board (FASB)'s Accounting Standards Update 2016-02 Leases (Topic 842). The new standard most significantly changes lessee accounting compared to existing US GAAP, but also has some targeted changes for lessor accounting. Overall, ASU 2016-02 seeks to improve transparency to the economics of lease transactions and bring lease accounting into line with other recently released accounting standards updates, such as the changes to Revenue from Contracts with Customers (Topic 606).
The Financial Accounting Standards Board’s (FASB) Emerging Issues Task Force (EITF) recently met to discuss its open issues. During the March meeting, the task force reached final consensus on two EITF issues, and arrived at consensus-for-exposure drafts on three additional issues.
IFRS 15 - Presentation (notes).pdf for accountingDawoodZahid6
FRS 15 is effective for annual reporting periods beginning on or after 1 January 2018, with earlier application permitted.
IFRS 15 establishes the principles that an entity applies when reporting information about the nature, amount, timing and uncertainty of revenue and cash flows from a contract with a customer. Applying IFRS 15, an entity recognises revenue to depict the transfer of promised goods or services to the customer in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.
To recognise revenue under IFRS 15, an entity applies the following five steps:
identify the contract(s) with a customer.
identify the performance obligations in the contract. Performance obligations are promises in a contract to transfer to a customer goods or services that are distinct.
determine the transaction price. The transaction price is the amount of consideration to which an entity expects to be entitled in exchange for transferring promised goods or services to a customer. If the consideration promised in a contract includes a variable amount, an entity must estimate the amount of consideration to which it expects to be entitled in exchange for transferring the promised goods or services to a customer.
allocate the transaction price to each performance obligation on the basis of the relative stand-alone selling prices of each distinct good or service promised in the contract.
recognise revenue when a performance obligation is satisfied by transferring a promised good or service to a customer (which is when the customer obtains control of that good or service). A performance obligation may be satisfied at a point in time (typically for promises to transfer goods to a customer) or over time (typically for promises to transfer services to a customer). For a performance obligation satisfied over time, an entity would select an appropriate measure of progress to determine how much revenue should be recognised as the performance obligation is satisfied.
Standard history
In April 2001 the International Accounting Standards Board (Board) adopted IAS 11 Construction Contracts and IAS 18 Revenue, both of which had originally been issued by the International Accounting Standards Committee (IASC) in December 1993. IAS 18 replaced a previous version: Revenue Recognition (issued in December 1982). IAS 11 replaced parts of IAS 11 Accounting for Construction Contracts (issued in March 1979).
In December 2001 the Board issued SIC‑31 Revenue—Barter Transactions Involving Advertising Services. The Interpretation was originally developed by the Standards Interpretations Committee of the IASC to determine the circumstances in which a seller of advertising services can reliably measure revenue at the fair value of advertising services provided in a barter transaction.
In June 2007 the Board issued IFRIC 13 Customer Loyalty Programmes. The Interpretation was developed by the IFRS Interpretations Committ
FRS 15: Determining and allocating the transaction pricePwC
IFRS 15, Revenue from Contracts with Customers, (the Standard) will have a profound impact on the way in which the Communications industry measures and reports revenue. The industry is currently assessing the impact of the Standard on its current revenue recognition policies. Operators also have major change and implementation programmes in progress reflective of the impact this Standard will have on accounting, systems and the processes of the business.
On July 31, 2015, the Financial Accounting Standards Board (FASB) issued FASB Accounting Standards Update (ASU) 2015-12, which is designed to simplify several aspects of employee benefit plan financial reporting, including (1) fully benefit-responsive investment contracts, (2) certain plan investment disclosures, and (3) provide a measurement date practical expedient. ASU 2015-12 is effective for fiscal years beginning after December 31, 2015, however, early adoption is permitted, thus, employee benefit plans may elect to adopt any, or all, of the provisions in the ASU for plan financial statements that have not yet been issued.
Streaser, S., Jialin Sun, K., Perez Zaldivar, I., & Ran, Z. (2014).docxflorriezhamphrey3065
Streaser, S., Jialin Sun, K., Perez Zaldivar, I., & Ran, Z. (2014). Summary of the New FASB and IASB Revenue Recognition Standards. Review Of Business, 35(1), 7-15.
Summary of the New FASB and IASB
Revenue Recognition Standards
Scott Streaser, Deloitte & Touche LLP, New York
[email protected]
Kevin Jialin Sun, The Peter J. Tobin College of Business, St. John’s University, New York
[email protected]
Ignacio Perez Zaldivar, Deloitte & Touche LLP, New York
[email protected]
Ran Zhang, St. John’s University, New York
[email protected]
Executive Summary
The joint task force of the Financial Accounting
Standards Board (FASB) and International
Accounting Standards Board (IASB) finalized its
project to develop a joint revenue recognition
standard on May 28th, 2014, when the FASB
and IASB issued Accounting Standards Update
(ASU) 2014-09 and IFRS 15, respectively (“the
Standard”). The new standard, Revenue from
Contracts with Customers, moves away from
the current risks and rewards model, and
adopts a contract- and control-based approach.
Specifically, an entity would be required
to identify a contract with a customer and
assign the transaction price to performance
obligations embedded in the contract.
Revenue can only be recognized when (or
as) a performance obligation is satisfied by
transferring the control of promised goods
or services to the customer. The standard
applies to all entities and replaces most current
industry-specific guidance.
While the provisions of the new revenue
recognition standard are substantially
converged under International Financial
Reporting Standards (IFRS) and U.S. Generally
Accepted Accounting Principles (U.S. GAAP),
minor differences continue to exist. Except
where specifically noted otherwise, this article
discusses the new framework and important
changes to the current revenue recognition
standards under U.S. GAAP only.
To illustrate the effect of the change in this
article, we apply the provisions of the new
revenue standard to a hypothetical contract
between a telecommunications company and
a customer, in which the company promises
to transfer a bundle of goods and services
consisting of: (1) a subsidized handset, and
(2) a non-cancellable service contract to the
customer for fixed consideration. The example
demonstrates that under the new standard,
revenue recognition of the bundled contract
will be accelerated when compared to current
revenue recognition guidance. Specifically,
revenue allocated to the sale of the handset
upon delivery will increase, and revenue later
will decrease.
Background
Since formally agreeing to work jointly on the
revenue project in 2002, the FASB and IASB
have collaborated on the joint task of issuing
a converged revenue recognition standard.
The goal of the task force is to develop a
more robust and consistent framework for
revenue recognition, as well as to increase the
comparability of revenue recognition practices
across entities, countries, and industries. The
boards issued Exposu.
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Ind as bbsr (cma m.acharya)
1. Ind AS 115
Adoption of New
Revenue Recognition Standard
IFRS 15/ Ind AS 115
and Its
Implementation Challenges
1
2. Adoption of New Revenue Recognition Standard –
IFRS 15/ Ind AS 115 and Its Implementation
Challenges
Ministry of Corporate Affairs (MCA) notified the roadmap for
implementation of converged IFRS (i.e. Ind-AS) and India opted
for early adoption of the newly issued revenue standard IFRS 15
effective from 1st
April, 2015.
Implementation of the new revenue standard would require
numerous organisational and business changes, and a robust
internal control backed by strong IT environment is the key for
successful migration towards the new revenue recognition
regime.
2
3. Adoption of New Revenue Recognition Standard –
IFRS 15/ Ind AS 115 and Its Implementation
Challenges IASB has issued IFRS 15 “Revenue from Contract with
Customers” which will be applicable from accounting period
commencing on or after 1st January 2018. The newly issued
standard will replace 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) and SIC-31 (Revenue—
BarterTransactions Involving Advertising Services).
IFRS 15 will replace AS 7 (Construction Contracts), AS 9 (Revenue
Recognition) and Guidance Notes issued by the ICAI. Core
principle of IFRS 15 is that revenue should be recognised for
transferred goods or services for the consideration which the
entity is entitled.
3
4. Adoption of New Revenue Recognition Standard – IFRS 15/
Ind AS 115 and Its Implementation Challenges
Revenue should be recognised for transferred goods and services
for the consideration which the entity is entitled.
The following steps should be followed for Revenue Recognition:
4
5. Steps need to be followed
Identify the contract with the customer–
A contract is an agreement between two or more parties which creates an
enforceable right.
Identify the performance obligation of the contract
Performance obligation can be in the form of transfer of goods and services
to the customer.
Determine the transaction price
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. Transaction price can be fixed, variable, a
combination of both or non-cash consideration. In case there is a financing
element in the contract then transaction price has to be adjusted for this
factor.
This Standard provides detail guidance for all the situations.
5
6. Ind AS 115
Allocate the transaction price to the performance obligations in the contract–
In case multiple goods or services are promised in a single contract (called as
bundled contract), entire transaction price is allocated on the basis of relative
stand-alone selling price of each good or service. Relative fair value method is
prescribed by the standard for allocating the transaction price but residual value
method is also permitted in certain circumstances. The standard provides guidance
on allocation of discount or variable consideration to the distinct goods or services.
Recognise revenue when the entity satisfies a performance obligation–
An entity recognises revenue when it satisfies a performance obligation in the
contract. The performance obligation is satisfied when the entity transfers the control
of the promised goods or services. In case performance obligation is satisfied over a
period of time then the entity can recognise revenue based on output method or input
method provided the entity has a right to payment for performance completed till
date. This is the significant change as compared to the prevailing accounting guidance
where obligation is deemed to be satisfied when the entity transfers the risks and
rewards to the customer.
6
7. Ind AS 115 / IFRS 15 Significant changes
Timing of Revenue Recognition-
Under AS 9, the timing of revenue recognition from the sale of
goods is based primarily on the transfer of risks and rewards.
IFRS 15, instead, focuses on when control of those goods has
been transferred to the customer.
This difference may change the timing of revenue recognition as
it may happen that the legal title of the goods remains with the
seller but the necessary control to obtain economic benefit has
been transferred to the customer.
If the control of a good or service is transferred over a period
then revenue shall be recognised over the period.
This change may impact real estate companies in a big way.
7
8. Ind AS 115 / IFRS 15 Significant changes
Different performance obligations under single contract–
In certain circumstances, recognition criteria are to be applied
separately on identifiable components of the contract.
This would be going to impact industries like telecom, software
development, infrastructure, etc. where long term contracts are
entered.
8
9. Ind AS 115 / IFRS 15 Significant changes Example
A Telecom Company launches a scheme in which it will provide
free handsets to its customers and will charge a fixed monthly
fee of Rs 1,000 for 12 months.
Company sells the same handset to other customers at Rs.4,000
and monthly payment plan without handset is Rs.800.
Prevailing revenue recognition standards do not provide
guidance on how to identify the components and how to allocate
selling price and most of the telecom companies recognise
service revenue and treat the cost of handset as cost of acquiring
the customer.
9
10. Different performance obligations under single contract–
In certain circumstances, recognition criteria are to be applied separately on identifiable
components of the contract. This is going to impact industries like telecom, software
development, infrastructure, Etc. where long term contracts are entered.
Illustration
A Telecom Company launches a scheme in which it will provide free handsets to its
customers and will charge a fixed monthly fee of Rs 1,000 for 12 months. Company
sells the same handset to other customers at Rs.4,000 and monthly payment plan without
handset is Rs.800.
Prevailing revenue recognition standards do not provide guidance on how to identify the
components and how to allocate selling price and most of the telecom companies
recognise service revenue and treat the cost of handset as cost of acquiring the customer.
Under IFRS 15, the company has to identify the obligations under the contract i.e. to
deliver the handset and provide network services for 12 months.
Transaction price of Rs.12,000 is allocated between these components (refer table
below)-
10
11. Ind AS 115 / IFRS 15 Significant changes Example
Under IFRS 15, the company has to identify the obligations
under the contract i.e. to deliver the handset and provide network
services for 12 months. Transaction price of Rs.12,000 is
allocated between these components; as follows :
11
12. Different performance obligations under single contract–
Performance
Obligation
Stand alone
Selling Price
% on Total Relative Selling
Price
Timing of
Revenue
Recognitaion
Sale of Hand-
Set
4,000 29.41% 3,529 When the
Handset is
delivered
Network
Services
9,600
(800 x 12)
70.59% 8,471 Over the Service
Period
Total 13,600 100 12,000 Careful about
Revenue
recognition
12
13. Ind AS 115 / IFRS 15 Significant changes Example
The above transaction has been broken into two parts because
the customer can get benefit from these two on their own and
both of these are readily available in the market.
Conversely, the recognition criteria are applied to two or more
transactions together when these are linked in such way that
the Commercial effect cannot be understood without reference
to the series of transactions as a whole.
13
15. Contract modification-
A contract modification is a change in the scope or price (or both) of a contract
that is approved by the parties to the contract. A contract modification can be
either accounted as a separate contract or otherwise.
A modification shall be accounted as separate contract if scope of the contract
increases due to addition of promised goods services and the contract price
increases by the amount which reflects the stand-alone price of additional
promises made in the contract. If the contract modification is not treated as a
separate contract as described above and remaining goods or services to be
delivered after modification of the contracts are different from goods/services
already delivered then the amount of consideration shall be allocated to the
remaining performance obligation
Revenue should be recognised segment wise
15
16. Ind AS 115 / IFRS 15 Significant changes Example
Under AS 9, the timing of revenue recognition from the sale of
goods is based primarily on the transfer of risks and rewards.
IFRS 15, instead, focuses on when control of those goods has
been transferred to the customer.
This difference may change the timing of revenue recognition as
it may happen that the legal title of the goods remains with the
seller but the necessary control to obtain economic benefit has
been transferred to the customer.
16
17. Ind AS 115 / IFRS 15 Significant changes Example
The basic fundamental under IFRS is that every transaction has
a value if the goods or services are distinct.
Based on this principle, revenue recognition for some entities
will change which provide certain goods/services as free (as
nothing is accounted as free under IFRS).
In such kind of transactions, relative fair value of goods/services
offered is to be determined and it has to be deferred until these
goods/services are delivered.
17
18. Ind AS 115 / IFRS 15 Significant changes Example
Transactions containing financing element-
There are certain transactions which are technically sale of
goods/services but the substance of the contract contain
significant financing component.
E.g, A sells goods to B for Rs.10,000 and at the same time it
agrees to buy the same goods after a period of six months at
Rs.12,000. In this case, if on the basis of criteria mentioned in
the standard it is concluded that the transaction contains
significant financing component, then Rs.2,000 will be treated as
finance cost over six months period and no revenue will be
recognised (assuming that the cash selling price in normal
course is also Rs.10,000.)
18
19. Ind AS 115 / IFRS 15 Significant changes Example
Contract modification-
Change in the scope or price (or both) of a contract which would
either be accounted as a separate contract or otherwise.
A modification shall be accounted as separate contract if scope
of the contract increases due to addition of promised goods
services and the contract price increases by the amount which
reflects the stand-alone price of additional promises made in the
contract.
19
20. Ind AS 115 / IFRS 15 Significant changes Example
If the contract modification is not treated as a separate contract,
remaining goods or services to be delivered after modification of
the contracts are different from goods/services already delivered
then the amount of consideration shall be allocated to the
remaining performance obligation.
In case the remaining goods or services to be delivered after
modification of the contracts are not distinct, then it shall be
treated as part of the existing contract.
Industry implications in certain industries, like
Telecommunication, where the customers frequently change the
bill plan and an entity must determine whether the modification
creates a new contract or whether it will be accounted for as part
of the existing contract.
20
21. Ind AS 115 / IFRS 15 Significant changes Example
Variable Consideration–
Variable consideration can be in the form of discounts, rebates, refunds,
price concessions, incentives, etc. and can also vary due to occurrence or
non-occurrence of future events.
Variable consideration may arise out of the contractual terms or
customary business practices.
For accounting, an entity shall estimate the amount of variable
consideration by using the probability techniques and historical data and
recognise a refund liability.
An entity shall reassess the variable consideration at each balance sheet
period. Customer’s right to return the goods is treated as variable
consideration as per this standard and the entity has to ensure the
expected return at each reporting period.
21
22. Ind AS 115 / IFRS 15 Significant changes Example
Incremental cost for obtaining contract-
The incremental costs of obtaining a contract are those costs that
an entity incurs to obtain a contract with a customer that it would
not have incurred if the contract had not been obtained (like sales
commission).
An entity shall recognise the incremental costs of obtaining a
contract with a customer as an asset if the entity expects to recover
those costs. The recognised asset shall be amortised on a
systematic basis that is consistent with the transfer to the customer
of the goods or services to which the asset relates. Costs to obtain
a contract that would have been incurred regardless of whether
the contract was obtained shall be recognised as an expense when
incurred, unless those costs are explicitly chargeable to the
customer regardless of whether the contract is obtained.
22
23. Ind AS 115 / IFRS 15 Significant changes Example
Right to return–
Entities transfer the control of the goods to the customer and also
grant the customer the right to return the product for various
reasons (such as dissatisfaction with the product).
The right to return can be in the form of full or partial refund,
credit of amount that can be applied by the customer or exchange
of the product.
Accounting Treatment in such case
23
24. Ind AS 115 / IFRS 15 Significant changes Example
Accounting Treatment in such case
Entity shall recognise the revenue for the transferred products in
the amount of consideration to which the entity expects to be
entitled
(therefore, revenue would not be recognised for the products
expected to be returned);
i) A refund liability shall be recognised; and
ii) . An asset (and corresponding adjustment to cost of sales) shall
be recognised for entity’s right to recover products from customers
on settling the refund liability.
24
25. Ind AS 115 / IFRS 15 Significant changes Example
Warranty–
Warranty can either be for the performance of the product or a
service obligation may also be present in addition to the
performance of the product.
If the warranty includes service obligation along with the
performance of the product, then the transaction price shall be
allocated between product and service.
In case cannot be accounted separately, the entity shall account for
both of the warranties together as a single performance obligation.
25
26. Ind AS 115 / IFRS 15 Significant changes Example
Warranty–
If a customer has the option to purchase a warranty separately, the
warranty is a distinct service and the transaction price shall be
allocated between product and warranty.
If a customer does not have the option to purchase a warranty
separately then an entity shall create a provision for warranty
liability in accordance with IAS 37 Provisions, Contingent
Liabilities and Contingent Assets.
26
27. Ind AS 115 / IFRS 15 Significant changes Example
Consideration payable to customer–
At times, customer incurs expenses on behalf of the company (say,
distributor incurring advertisement expenses, display charges, etc.
for the company’s products) and claims reimbursement from the
Company. Currently, these expenses are charged as selling and
advertisement expenses in the profit and loss account.
Under IFRS 115, consideration payable to customer is accounted
as deduction from revenue unless the payment is for a distinct
good or service from the customer in which case an entity shall
account for the purchase of the good or service in the same way
that it accounts for other purchases from suppliers.
27
28. New Revenue Recognition Standard –
Ind AS 115 / IFRS 15
IASB has issued IFRS 15 “Revenue from Contract with
Customers” which will be applicable from accounting period
commencing on or after 1st January 2018.
The newly issued standard will replace 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)
and SIC-31 (Revenue—Barter Transactions Involving
Advertising Services).
28
29. New Revenue Recognition Standard – Ind AS 115
/ IFRS 15
IFRS 15 will replace AS 7 (Construction Contracts), AS 9
(Revenue Recognition) and Guidance Notes issued by the
ICAI.
Core principle of IFRS 15 is that revenue should be recognised
for transferred goods or services for the consideration which the
entity is entitled.
29
30. New Revenue Recognition Standard – Ind AS 115 / IFRS 15
Steps Identify the contract with the customer
A contract is an agreement between two or more parties which
creates an enforceable right. It provides details for contract
modification and combination of contracts.
Determine the transaction price
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.
Transaction price can be fixed, variable, a combination of both
or non-cash consideration. In case there is a financing element
in the contract then transaction price has to be adjusted for this
factor.
30
31. New Revenue Recognition Standard – Ind AS 115 / IFRS 15
Steps Allocate the transaction price to the performance obligations
in the contract–
In case multiple goods or services are promised in a single
contract (called as bundled contract), entire transaction price is
allocated on the basis of relative stand-alone selling price of each
good or service.
Relative fair value method is prescribed by the standard for
allocating the transaction price but residual value method is also
permitted in certain circumstances.
The standard provides guidance on allocation of discount or
variable consideration to the distinct goods or services.
31
32. New Revenue Recognition Standard – Ind AS 115 / IFRS 15
Steps
Recognise revenue when entity satisfies a performance
obligation–
An entity recognises revenue when it satisfies a performance
obligation in the contract. The performance obligation is satisfied
when the entity transfers the control of the promised goods or
services. In case performance obligation is satisfied over a period
of time then the entity can recognise revenue based on output
method or input method provided the entity has a right to
payment for performance completed till date.
This is the significant change as compared to the prevailing
accounting guidance where obligation is deemed to be satisfied
when the entity transfers the risks and rewards to the customer.
32