IFRS 15 Presentation

IFRS 15 Revenue from Contract with Customers
Deloitte & Touche Middle East – October 30, 2017

Contents
01 Introduction
Overview of IFRS 15
02 Scope
What’s included Introduction
The core principle Scope
03 The five step model The five step model

Step 1: Identify the Contract with the Customer
Other specific
Step 2: Identify the Performance Obligations in the Contract considerations
Step 3: Determine the Contract Price
Step 4: Allocate the Transaction Price to the Performance
Obligations
Step 5: Satisfaction of Performance Obligations
04 Other specific considerations
Warranties
Contract costs in obtaining and fulfilling a contract
Material rights
Transition
Disclosures
Case study
© 2017 Deloitte & Touche (M.E.). All rights reserved. IFRS 15: Revenue from Contracts with Customers
Introduction
Introduction
Scope
The five step model
Other specific
considerations
Introduction
Overview of IFRS 15
• IASB and the FASB jointly issued a new revenue recognition on 28 May 2014
• Supersede virtually all revenue recognition requirements in IFRS and US GAAP
• IFRS 15 supersedes:
− IAS 18 - Revenue Effective for

− IAS 11 - Construction Contracts annual periods
− IFRIC 13 - Customer Loyalty Programmes beginning on or
− IFRIC 15 - Agreements for the Construction of Real Estate after 1 January
− IFRIC 18 - Transfers of Assets from Customers; and 2018
− SIC-31 - Revenue – Barter Transactions Involving Advertising Services
• Introduction of a five-step model that will apply to all revenues earned from a contract
with a customer
• Method of transition either (a) full retrospective approach or a (b) modified

retrospective approach
• Requires extensive disclosures in the financial statements (e.g. key judgments and
estimates)
Introduction
Overview of IFRS 15
Entities
What does it mean for you?

• Revenue recognition principles will
change
• P/L may vary significantly
Auditors
• IT Systems, Accounting Policies, Internal
Processes and Controls may be subject to
Significant
change
challenges What does it mean for auditors?
• Challenges around availability of historical
data • More judgments and estimates to audit
• May require extensive training • Disclosure audit is more challenging
• Tax planning • Change in the policies and processes
require realigning understanding and
audit procedures
• May require involvement of experts
• May require extensive controls testing
and analytical procedures
Scope
Introduction
Scope
The five step model
Other specific
considerations
Scope
What’s included
In scope Out of scope
• Contracts with Customers • Lease contracts [IAS 17/ IFRS 16]
• Certain contract costs • Insurance contracts [IFRS 4]
• Financial instruments and certain other contracts

[IFRS 9]
• Group Accounting and Certain non-monetary

exchanges [IFRS 10, IAS 27 and IAS 28]
Scope
The core principle
Recognize revenue to depict the transfer of promised goods or
services to customers in an amount that reflects the consideration to
Step 5
which the entity expects to be entitled in exchange for those goods
or services
Recognize revenue
Step 4 when (or as) each
performance
obligation is
Allocate transaction satisfied
Step 3 price to the
separate
performance
Determine the obligations
Step 2 Transaction Price
Identify the
Step 1 separate
performance
obligations in the
Identify the contract
contract(s) with
the customer
The five step model
Introduction
Scope
The five step model
Other specific
considerations
The five step model
Step 1 – Identify the contract with the customer
A legally enforceable contract (including oral or implied) must meet  If the criteria are met at
all of the following requirements: inception, reassessment
 Parties have approved the contract and are committed to perform; only occurs if there is a
significant change in
 Each party’s rights and payment terms are identifiable;
facts and circumstances
 It is probable the entity will collect the consideration it’s entitled to in exchange for the transfer
of goods/services to the customer; and  If the criteria are not
 Contract has commercial substance. met at the inception,

continue to assess until
Combining contracts the criteria are met.
IFRS 15 requires entities to combine contracts entered into at or near the same time with the
same customer if they meet one or more of the following criteria:
• The contracts are negotiated as a package with a single commercial objective;
• The amount of consideration to be paid in one contract depends on the price of performance of
the other contract; or
• The goods or services promised in the contracts are a single performance obligation.
The five step model
Step 1 – Identify the contract with the customer
Contract modifications – an approved change in the scope or price
(or both) of a contract
1- Entity considers whether the change is approved
Could be approved in writing, oral or implied by customary business practices
2 – Entity considers whether a modification should be accounted as a separate

contract
Separate contract
Not a separate contract
• Addition of distinct goods and
services; and • Not distinct goods and services
• Pricing is similar to standalone • Pricing does not reflect the
price at the time of standalone price
modification.
The five step model
Step 2 – Identifying the performance obligations
A performance obligation represent a promise to transfer to the customer
either:
• A good or service (or a bundle of goods and services) that is distinct; or
• A series of goods or services that are substantially the same and have the same pattern of
transfer to the customer.
In many cases,
goods/services are capable
of being distinct, but may
not be distinct in the
context of the contract.
The five step model
Step 2 – Identifying the performance obligations (continued)
Factors that indicate that a bundle of goods/services are not distinct in the
context of the contract:
• The entity provides a significant service of integrating the good/service with other
goods/services promised in the contract;
• The good or service significantly modify or customize another good or service promised in the
contract; and
• The good or service is highly dependent on, or highly interrelated with, other goods or services
promised in the contract.
The five step model
Step 2 – Identifying the performance obligations (continued)
Series of distinct goods or services that are substantially the same and that
have the same pattern of transfer
• The goods or services are substantially the same;
• Each distinct good/service would be satisfied over time if it were accounted for separately; and
• The entity would measure its progress toward satisfaction of the performance obligation using
the same measure of progress for each distinct good/service in the series.
All criteria must be met
The five step model
Step 3 – Determine the transaction price
Amount of consideration expected to be entitled for in exchange for transferring
goods/services to a customer – may differ from contractual price
Variable consideration
Fixed consideration
• Estimated and potentially The amount is fixed and not
constrained contingent on the outcome of
• Performance bonuses future events
• Penalties/claims
• Incentives
• Rights of return Excludes
• Discounts • Credit risk: the
Consideration payable to customers transaction price would
Transaction not be reduced for the
Reduces transaction price unless
Price effects of customer credit
payment is made for a distinct
risk
good/service
• Amounts collected on
• Coupons/Vouchers
behalf of third parties
• Rebates
• Shelf space payments
Non-cash consideration
Time value of money
• Consideration in a form other than cash
If significant financing component is • Share consideration
identified, an adjustment to • Material, equipment, labor
transaction price is required • Contribution of assets
• Shall be measured at FV
The five step model
Step 3 – Determine the transaction price (continued)
Variable consideration
• The amount of consideration may vary due to items such as claims, performance bonuses,
discounts, refunds, credits, price concession, penalties and other similar items.
1- Entity must estimate the variable consideration
• Methods of estimation should best predicts the amount the company will be entitled:
Method Most appropriate situations
Expected value (sum of When there is a large number of possible

probability weighted amounts) outcomes (i.e., multi-tiered bonus structure)
When there are only two possible outcomes (i.e.,

Most likely amount
bonus for early delivery)
• The same method must be applied to each variable consideration throughout the life of a
contract and for similar types of contracts.
• The entity must update the estimated transaction price at the end of each reporting period.
The five step model
Variable consideration (continued)
2- Entity considers whether the variable consideration needs to be constrained

• Entities are allowed to include variable consideration in the transaction price only to the
extent it is highly probable there will not be a significant reversal of revenue when the
related uncertainty is resolved.
The five step model
Significant financing component
1- Entity identifies significant financing components
• May exist when the receipt of consideration does not match the timing of the transfer of
goods/services to the customer.
• Entities are required to adjust the transaction price if the financing component is significant
to the contract.
The five step model
Step 4 – Allocating the transaction price to the performance obligations
The transaction price shall be allocated to each Performance Obligation (P.O.) based on
its standalone selling price at contract inception
• How to determine the standalone selling price (“SSP”)?
Best evidence: observable price of a good/service when sold on a standalone basis else:
• Evaluate the market in which goods or services are sold. Estimate the
price that customers in that market would be willing to pay.
Market • Refer to prices from competitors for similar goods or services
adjusted for entity-specific costs and margins.
IFRS 15 allows the use of

Expected
• Forecast expected costs of satisfying a performance obligation any reasonable estimation
costs
adjusted for an appropriate margin.
method.
• Total transactions price less the sum of the observable stand-alone

selling price.
• This method may only be used when:
Residual - selling price is highly variable; or
- selling price is uncertain (a price has not yet been established or
good or service has not been previously sold).
The five step model
Step 4 – Allocating the transaction price to the performance obligations
(continued)
A discount is required to be allocated only to the specific goods/services to which it relates, rather
than proportionately to all of the separate POs.
Assess whether variable consideration must be allocated entirely to a specific part of a contract
Standalone selling prices are NOT updated after contract inception.
The changes in the transaction price are allocated to the POs on the same basis as the initial
allocation.
The five step model
Step 5 – Satisfaction of Performance Obligations
• An entity recognises revenue when (or as) it satisfies a performance obligation by transferring a
promised good/service to a customer.
• A good/service is considered to be transferred when the customer obtains controls.
Performance satisfied over time = Revenue recognized over time
The entity does not

The entity’s The customer receives create an asset that has
performance creates or and consumes the an alternative use to the
enhances an asset OR benefits of the entity’s OR entity and the entity
controlled by the performance as the has the right to be
customer. entity performs. paid for performance to
date.
IF NOT
Revenue recognized at a point in time
The five step model
Step 5 – Satisfaction of Performance Obligations (continued)
Control
• Control of the good/service refers to the ability to direct its use and obtain substantially all of its
remaining benefits.
• Control also means the ability to prevent other entities from directing the use of and receiving the
benefit from, a good/service.
• Other indicators that control transfers include:
Present right to payment
Legal title of goods and services
Transferred physical possession
Significant risks and rewards of ownership
The customer has accepted the asset
Other specific considerations
Introduction
Scope
The five step model
Other specific
considerations
Warranties
Assurance-type Service-type
Provide a service to the customer in addition to

Do not provide an additional good/service to
Definition assurance that the delivered product is as
the customer
specified in contract
Performance Represents a distinct service and is a separate

Not a separate P.O.
obligation? P.O.
• The entity shall allocate a portion of the

transaction price to the warranty based on
the estimated standalone selling price of the
Accounting Accounted for as an estimated cost accrual as warranty.
treatment per IAS 37
• Revenue allocated to the warranty shall be
recognised over the period the warranty
service is provided.
Contract costs in obtaining and fulfilling a contract
• Incremental costs in obtaining a contract may be capitalized
• Costs incurred in fulfilling a contract
− May be capitalized when the following three criteria are met:
- Costs relate directly to a contract (or anticipated contract) that can be specifically
identified (e.g., costs of designing an asset to be transferred under a specific contract that
has not yet been approved);
- Costs generate or enhance resources that will be used in satisfying POs in the future; and
- Costs are expected to be recovered.
Material rights
• Customer options are additional performance obligations in an arrangement if they provide the
customer with a material right that it would not otherwise receive without entering into the
arrangement (e.g., discounts) and is highly likely that the option will be exercised.
• Future discounts also do not provide a material right if the customer or class of customers could
obtain the same discount without entering into the current transaction.
• The entity then recognizes revenue when those future goods/services are transferred or when the
option expires.
Transition approach
IFRS 15 allows entities to apply one of two transition methods:
Retrospective Approach
Characteristics
Entities shall apply new guidance to both prior period and current period presented in the financial
statements in accordance with IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors.
Certain practical expedients are available for consideration:

- For completed contracts, entities do not need to restate contracts that:
(i) begin and end within the same annual reporting period; or
(ii) are completed contracts at January 1, 2017.
- For contracts that were modified before January 1, 2017, entities need not retrospectively restate the
contract for those modifications. Instead, an entity shall reflect the aggregate effect.
- For all reporting periods presented before January 1, 2018, an entity need not disclose the amount of
the transaction price allocated to the remaining performance obligations and an explanation of when
the entity expects to recognize that amount as revenue.
Transition approach (continued)
Modified Retrospective Approach
Characteristics
Cumulative effect of initially applying this Standard recognised at January 1, 2018 is adjusted to
the opening balance of retained earnings on the financial statements for the year ending
December 31, 2018.
Practical Expedients
Entities may use one or more of the following practical expedients when using this method:
- Entities may elect to apply this Standard only to contracts that are not completed at January
1, 2018.
- For contracts that were modified before January 1, 2017 or January 1, 2018 entities shall
reflect the aggregate effect of all those modifications on either these two dates when:
(i) identifying the satisfied and unsatisfied P.O.s;
(ii) determining the transaction price; and
(iii) allocating the transaction price to the satisfied and unsatisfied P.O.s.
Additional Disclosures are required when selecting modified retrospective approach.
Disclosures
The objective of the disclosure requirements is for an entity to disclose
sufficient information to enable users of financial statements to understand
the nature, amount, timing and uncertainty of revenue and cash flows arising
from contracts with customers.
Entities are
Contracts with required to
customers disclose in Note 2
•Description of •Policy decisions – of the 2017
significant •Disaggregation of revenue; time value of Financial
judgments •Contract balances money and cost to Statements the
applied/transaction (including reconciliation); obtain a contract; potential effect
price, allocation •Information about and arising from the
methods and performance obligations;
assumptions. •Contract costs. implementation of
•Remaining performance IFRS 15 which is in
obligations; and issue but not yet
Significant •Practical expedients. Others effective.
judgments
Highlight - Case Study: Guide 1 Background
Force contracts with FlyJet to sell

• 10 aircraft engines for $12 million each
• 20 spare parts for $300,000 each
• FlyJet option to purchase additional

specific spare parts
• Loss leader contract – aircraft engines

priced at less than the cost of
manufacture, in anticipation of spare
parts securing profits
• Estimated sale of 75 optional spare

parts over 5 years
Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee (“DTTL”), its
network of member firms, and their related entities. DTTL and each of its member firms are legally separate and independent
entities. DTTL (also referred to as “Deloitte Global”) does not provide services to clients. Please see www.deloitte.com/about to
learn more about our global network of member firms.
Deloitte provides audit, tax, consulting, and financial advisory services to public and private clients spanning multiple industries.
With a globally connected network of member firms in more than 150 countries and territories, Deloitte brings world-class
capabilities and high-quality service to clients, delivering the insights they need to address their most complex business
challenges. Deloitte’s more than 244,000 professionals are committed to becoming the standard of excellence.
This communication contains general information only, and none of Deloitte Touche Tohmatsu Limited, its member firms, or their
related entities (collectively, the “Deloitte Network”) is, by means of this communication, rendering professional advice or services.
No entity in the Deloitte network shall be responsible for any loss whatsoever sustained by any person who relies on this
communication.
© 2017. For information, contact Deloitte Touche Tohmatsu Limited

IFRS 15 Presentation

Transféré par

Informations du document

Copyright

Formats disponibles

Partager ce document

Partager ou intégrer le document

Options de partage

Avez-vous trouvé ce document utile ?

Ce contenu est-il inapproprié ?

Droits d'auteur :

Formats disponibles

IFRS 15 Presentation

Transféré par

Droits d'auteur :

Formats disponibles

IFRS 15 Revenue from Contract with Customers

Deloitte & Touche Middle East – October 30, 2017

03 The five step model The five step model

The five step model

• Supersede virtually all revenue recognition requirements in IFRS and US GAAP

− IAS 18 - Revenue Effective for

• Method of transition either (a) full retrospective approach or a (b) modified

What does it mean for you?

The five step model

In scope Out of scope

• Contracts with Customers • Lease contracts [IAS 17/ IFRS 16]

• Certain contract costs • Insurance contracts [IFRS 4]

• Financial instruments and certain other contracts

• Group Accounting and Certain non-monetary

The five step model

 Contract has commercial substance. met at the inception,

• The contracts are negotiated as a package with a single commercial objective;

2 – Entity considers whether a modification should be accounted as a separate

• A good or service (or a bundle of goods and services) that is distinct; or

• The goods or services are substantially the same;

All criteria must be met

Method Most appropriate situations

Expected value (sum of When there is a large number of possible

When there are only two possible outcomes (i.e.,

2- Entity considers whether the variable consideration needs to be constrained

1- Entity identifies significant financing components

IFRS 15 allows the use of

• Total transactions price less the sum of the observable stand-alone

Standalone selling prices are NOT updated after contract inception.

• A good/service is considered to be transferred when the customer obtains controls.

Performance satisfied over time = Revenue recognized over time

The entity does not

Revenue recognized at a point in time

• Other indicators that control transfers include:

Present right to payment

Legal title of goods and services

Transferred physical possession

Significant risks and rewards of ownership

The customer has accepted the asset

The five step model

Provide a service to the customer in addition to

Performance Represents a distinct service and is a separate

• The entity shall allocate a portion of the

• Incremental costs in obtaining a contract may be capitalized

• Costs incurred in fulfilling a contract

− May be capitalized when the following three criteria are met:

- Costs are expected to be recovered.

Certain practical expedients are available for consideration:

Modified Retrospective Approach

Additional Disclosures are required when selecting modified retrospective approach.

Force contracts with FlyJet to sell

• FlyJet option to purchase additional

• Loss leader contract – aircraft engines

• Estimated sale of 75 optional spare

© 2017. For information, contact Deloitte Touche Tohmatsu Limited

Vous aimerez peut-être aussi