Performance obligation is any good or service that contract promises to transfer to the customer. under licence during the term and subject to the conditions contained therein. But on the other hand it is badly effected my company’s DSO due to this artificial sale entry. Does IFRS defines the Commodities Swaps (non-monetary) with outside entities that not come under same business. Contract combination happens when you need to account for two or more contract as for 1 contract and not separately. But how should we determine the discount rate? In terms of identifying performance obligation (PO), I see that selling of engine, commissioning and warranty as one PO, training of customer as one PO, and finally spare parts as another separate PO. What’s changing with ASC 606/IFRS 15 and why. They have already prepared their account till 2016 under IAS 18 i.e. Should A report 25 as revenue ? IFRS 15 for the retail industry – Slotting/shelving fees 30 May 2018 Manufacturers and wholesalers sometimes pay retailers a fee to have their products placed on a retailer’s shelves, or to place the products in a more prominent area. Is it ok? A has given two type of rates . The currency of company and farmers is hryvni – the same. Looking for your kind advise. Like you have written article on IFRS 15 vs. IAS 18: Huge change is here!, may i know if there is similar article on IFRS 15 vs. IAS 11(Construction Contracts ). IFRS 15 sets the principles to apply when reporting about: of revenue and cash flows from a contract with a customer. I understand your point about variable consideration and agree with you, Therefore, be careful about intragroup transactions, as they often lack a commercial substance (as these companies often transfer inventories and other items at prices different than the market). (c) For business purpose, the spread of $100 is not disclosed so when invoices are issued to cargo owners, $500 is always stated together with the applicable Sales Tax and Withholding tax is deducted by Cargo owners on the $500 quoted. Yes, if the construction company has WIP as a result of some contract with customer. + free IFRS mini-course. If the company sells multiple identical products and does not meet the criterion of recognizing revenue over time, these products are one performance obligation or multiple performance obligations. If IFRS 15 has no impact on the company for the prior reporting periods, Does the company still need to choose one of the adoption method? Iam sorry for my mistake, I already remove your articles from my web. For the “Modified” Approach are you saying that currently ( Assume 31/12/2017 Year End) an entity can disclose Revenue inline with IAS 18 however from 2018 onwards the only effect will be shown through Retained Income? Hi Silvia! If you do need to separate => revalue the embedded forward and account for it separately (no revaluation on receivable), retains Net 100 . What does the contract say – is it to sell in USD? 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. Sponsorship Amount. Thanks in advance, Hie Silvia Faithful representation: Financial statements are complete and free from bias and error. if you do not need to separate => treat the whole receivable + forward as a hybrid contract, i.e. Dear, Last months I have given several workshops of Bank Analyzer, and the implications of the new IFRS 9 regulation, which was issued by the International Accounting Standard Board on 24 July 2014, and it is mandatory from 1 January 2018. They introduce concepts such as performance obligations and significant finance components, which could affect the revenue recognition of professional services organizations. Thank you! My local tax regulations enforces me to treat this event like sale but in actual this is not a sale. what are these “other” Standards? The company made entry: Dt Contract asset Cr Revenue 25000 UAH, because payment due on March 3 2017. However, it would be great if you can enlighten this. Hi Muhammad, thank you! Thanks Silvia for referring the article. How should the advance payment to truck owners be treated. A series of distinct goods or services that are substantially the same and have the same pattern of transfer. Well, the return is an event of the current reporting period – isn’t it? In Real Estate Company they usually have large land bank. If you have a contract with party other than a customer, then IFRS 15 does not apply. From what you wrote here, it seems this is this type of a license (as the right to access terminates after 4 years). Please check this Q&A, I described it there. The transportation costs to be reimbursed by the customers are billed together with the agreed transportation service fees. Hi Silvia, Hi, It is you expectation of what your receive. IFRS 15 sets the criteria for combined accounting. Hi Wendy, technically speaking you are right (or better said, speak about unseparable bottles within one package, some companies sell only by 6 pieces in 1 pack and in this case, the pack is a separate PO), but if all bottles are to be delivered at the same time, then you can group them and recognize the revenue at the point of time in total. your explanation is very clear. If the report shows an adverse opinion, you’re in hot water: the auditors feel that your financial statements don’t show a true and fair view. If I had tried going through the standards on my own I would probably still be floundering. Thanks for your continuous efforts to make us knowledgeable of IFRSs and any change of it. You get the point. I guess you invoiced on that day, too. It was the subject of a joint project with the Financial Accounting Standards Board (FASB), which issues … Thus make an adjustment in the current reporting period. Kosala. My apologize for wrong spelling of your name before. Wiley Release Date: March 15, 2012 Imprint: For Dummies ISBN: 9781119966531 Language: English Download options: EPUB 2 (Adobe DRM) Thanks before…. Hi Sunny, I really can’t say how – it depends on the specific transactions, bundle offers and many different things. I’m recording damaged sales of current year in following way: We dont chose our customers being road users thus customers credit worthiness is not practicable. French All-in-One For Dummies. whether it’s coming under IFRS 15 or IFRS 16. Hi Sylvia, If the objective is to dig a 20 meter hole and as at year end a 10 meter hold is dug. Since we are also recording part of the revenue on the free handset provided. I got both from IFRSBox. I need your guidance as I am having some serious hurdle implementing IFRS 15 in real estate sector. In my current company, we’re sometime swapping commodities (feed stock or semi finished goods or finished products) with other local companies with non-monetary values. May I know whether donation income of a charitable insitution is fallen into the scope of IFRS 15? Yes, but in this case we have increased the sales of previous year and decreased the sales of this year, we have made the worng allocation of revenues without correcting it. Add to basket. It illustrates all steps on a very simple telecom example. implied by some customary practices). Hi Sylvia Host contract is the contract for sale of non financial assets. (ii) when the goods were passed to customer, we book The reason is that in further steps, you will account for distinct performance obligations and their revenues separately, in line with their allocated transaction price, and if you fail in the correct identification of distinct performance obligations, then the whole contract accounting will be wrong. To my understanding, regarding the “TRANSPORTATION COST” it is not your cost nor your revenue , your company is just acting as agent for third party(government). if you determine that the control passes to a customer when the good is actually delivered (this might not always be the case, e.g. Thank you for your answer…. IFRS 9 for Dummies. The argument is base on substance over form principles, since the asset already operated by subsidiary and the contract is just a matter of time. S. Could you please tell me what is the other standards we can use if the 5 criteria didn’t meet? Thanks. A single good or service, or their bundle that is distinct; or. The question is whether similar trades in Ukraine are normally performed in USD or not – if yes, you don’t need to separate. There are ni writen agreements with customers but road users using toll roads should pay in terms Act and non payment is a crime in terms of Act. Please answer in the light of old standard and New IFRS, Hello Comparability: You can compare financial statements from one period to the next or for two companies in the same industry so that you can make informed decisions about the companies. 2) You recognize revenue from the sale of handset when telco passes control to the client (at the point of time) and revenue from network service as the client takes benefits (control) of it – over time. Dr Deferred income I just wanted to ask, can we recognise revenue on completion of a part of a performance objective? S. Whats the strategy can one adopt to be a star at IAS and IFRS. We receive the commissions from Insurance companies. Clear explanations to IFRS 15, I really appreciate Silvia. Dear Hashem, IFRS 15 provides a guidance about contract combinations and contract modifications, too. The revenues from network services are recognized as they are provided (over time) – i.e. I have a question about identifying the performance obligations. It is probable that an entity will collect the consideration – here, you need to evaluate the customer’s ability and intention to pay. IFRS 16 takes a totally new approach to accounting for leases, called the ‘right-of-use’ model. However, any replacements due to loss or damage are charged on the employee at Usd 10. if it’s a year ending 30 June 2018, then no, you do not have to follow IFRS 15. Under IFRS 15, as we have no contractual right, we have to Dr Contract asset but where will be the Cr entry going to? Cr ???? Hi Silvia, Thanks for helpful explanations. Can I ask another question about the adoption method (full retrospective adoption and modified retrospective adoption)? My question is what we have to do about intra group transactions as you also mentioned above that it lacks commercial substance. Many Thanks. I would say NO, because IFRS 15 guides revenues from contracts with customers and you cannot say that donors are customers of the charitable organization. And of course, some of your current receivables became non-current. Attention – it’s NOT always the price set in the contract. S. Thank you so much, appreciate your assistance. Trying to remember every single detail that needs to go in the notes is a nightmare, so do yourself a favour and invest in a reputable disclosure checklist. I have watched your video and thank you for providing us such a great and clear explanation! We must recogonize revenue based on actual completion of performance obligation instead (at the point of handover and accepted by client). S. Hi silvia.. IFRS 15 and ASC 606, which both come into effect soon, state key revenue recognition principles that will apply across international territories and industries. It makes easy understanding revenue . Control can be transferred over time or at the point of time. parking fees) are subject to reimbursement by the customers. Dear Olena, I am sorry, I am so busy these days that I have delays in responding these complex queries. Maybe reloading the browser would help. Hi Jane, Please, help me with accounting treatment under contracts with my customers. That’t the definition from the standard and in other words, it’s what you expect to receive from your customer in return for your supplies. Simply said, distinct means separable, or separately identifiable, and IFRS 15 sets criteria that you must assess in order to determine whether the performance obligation is distinct or not. Hello Sylvia, (sorry for the mess, I’d compiled all questions in 1 post) I think it will help me a lot with my ACCA P2 Corporate Reporting exam. So, Should i apply IFRS 15 in this period? Accounts receivable_Cr. WHY ? This new IRFS5 has big impact to my company and I have a question which I hope you will be able to give me some advice. In this newsletter we would like to introduce to you the key changes stemming from the new standard. S. With regards to the transition from IAS 18 to IFRS 15 disclosure etc… It seems understandable and very easy at first sight, and it truly is in many cases. However recognising capacity and consumption charges over the period of contract upon actual connection of cooling service.The connection fee is coming about only 4% of total expected revenue over the period of 25 years.we prefer to continue the upfront recognition of connection fee collected as revenue? IFRS (International Financial Reporting Standards) has to frequently change to keep up with the world’s demands. In 2011, Steve was named Accounting Technician of the Year at the British Accountancy Awards. It was adopted in 2014 and became effective in January 2018. they recognize revenue when they hand over the land or building in that period. 4. A collects 123 from customer. Thank you! In fact customer paid 28300 UAH on March. No idea I buy these illustrative pictures from stock photo and yes, he is cute, agreed! A receives 70 and accounts for VAT 23% and recognises revenues at 57 accounts for VAT 17.. so Dear Yulias, Can we recognize the scrip dividend/stock divided as an income ? The general rule is to do it based on their relative stand-alone selling prices, but there are 2 exceptions when you allocate in a different way: A stand-alone selling price is a price at which an entity would sell a promised good or a service separately to the customer (not in the bundle). Thanks Silvia – I wish if I could discover some other way rather than convincing tax authorities that should not effect your treatment of recognition of revenue. You need to apply IFRS 15 to all contracts that have the following 5 attributes (IFRS 15.9): So, if the contract does not meet all 5 criteria, then you don’t apply IFRS 15, but some other standard. I am struggle to find out a way how would I record these transactions with out impacting my Days sales outstanding? 3 300 (revenue or profit from changes in fair value) 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. Please check your inbox to confirm your subscription. Learn the who, what and why get the lowdown on why the standards were created and which countries use them, as well as the advantages of IFRS We just recognise the transportation service fee as our income. Can company apply IFRS 9 for contract assets and asses the contract assets at the fair value ? So why is IFRS 15 so extensive? First, you need to take the price stated in the contract as some basis (if applicable). The changes in fair value I will report in profit or Loss statement. S. Hi Silvia, thank you so much. Whether you’re preparing financial statements under IFRS (International Financial Reporting Standards) or looking at a set of IFRS financial statements, you’ve some key aspects to get to grips with. Non-monetary exchanges between entities within the same business to facilitate sales. Hi Wilson, The initial journal entry is Dr Transportation cost Cr cash. This means that if a company has control over, or right to use, an asset they are renting, it is classified as a lease for accounting purposes and, under the new rules, must be recognised on the company’s balance sheet. No, Trang, that’s not correct. Auditors make sure that the financial statements give a true picture of how a company has performed over the year. Thanks for the great explanation in that Q&A regarding software license! How we will pass journal entries for capitalising Costs to obtain a contract. which gives a “debit in unbill revenue CU1200” and “credit revenue headset CU285.60 + credit revenue telcom service of CU914.40”. Should we continue to recognize trade receivables (current); or reclassify the amounts due over 12 months to non-current items? Please check. SCOPE IFRS 15 applies to all contracts with customers, except the following: a. IFRS financial statements come in various shapes and sizes, but they all have certain features in common. Can we continue this upfront revenue recognition of connection fee as per IFRS 15? Our company is an insurance broker. Regarding first point here is NO contract with Fans who gonna buy tickets but even it considers Sales Revenue . It means that with a construction contract, percentage of completion method is no longer can be used. 3. Also, if there’s no transfer to customer, then there’s no performance obligation. Many thanks. The main concern now is that the billing are made monthly for the next 4 years (like an zero-interest installment). Can you please provide me details about how can I restate the 2017 figure according to UFSR 15 (was recorded according to IAS 18 earlier). Or company must change recognized revenue like additional bonus? I was fortune enough to read the article “account for barter transaction” before-hand while I posted my above comment. My question is, how to account for the trade-in transactions (e.g. IFRS 17 supersedes IFRS 4 Insurance Contracts and related interpretations and is effective for periods beginning on or after 1 January 2022, with earlier adoption permitted if both IFRS 15 Revenue from Contracts with Customers and IFRS 9 Financial instruments have also been applied. thank you very much . Please bear in mind that tax rules can differ from the IFRS rules and yes, although it is not a sale (just swap under IFRS 15), you might need to pay income taxes in line with your tax legislation. Can I apply IFRS 15 in the accounts ending June 2018? Net transaction: A has agreed a net rate of say 70 incl VAT 23%. 2) It’s a customer-based relationship. In my scenario, we’re swapping commodities (feed stock) of same nature at same price but in different time period. IFRS 17 is the newest IFRS standard for insurance contracts and replaces IFRS 4 on January 1st 2022. (a) Company A has a platform that serves as intermediary between truck owners and cargo owners. Woo! Thanks. Appreciate your assistance. Long term insurance policies : We sell more than 1 year ( 2/3/4 years) motor insurance policies to our clients and we receive total commissions ( credit notes) for all the years. If it’s a “royalty” paid to acquire contract, then yes, it’s a cost to obtain a contract. what should be correct accounting disclosures for principle ? S. Thanks for the detailed clear explanation. In this case there would not be any significant financing component. Learn the who, what and why – get the lowdown on why the standards were created and which countries use them, as well as the advantages of IFRS I would be glad to have clarifications on how revenue is recognized in a Logistics company that serves as intermediary between two parties. Hi Sebastian, thank you! Broadcasting. 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. Dear Silvia, For some of our customers, we have arranged subsequently new payment terms in arrears (up to two years), because they could not pay when the invoiced amounts were due. S. Another question please, the dividends revenue and other revenues that aren’t mentioned in IFRS 15,where I can find them? Be sure to regularly check the IASB’s website to keep up to date with developments. Under IFRS 15, can we recognise the full selling price of the service as revenue if it is offered for free e.g. Employees are provided with a security card for free when employed. Fertilizers were delivered to farmers in September 2016 when exchange rate was 25 UAH/USD. Hi Hashem, this depends on the specific transaction, but for example, IFRS 9 Financial instruments, IAS 16, etc. How Apttus Intelligent Quote-to-Cash solves compliance and automates across Contracts, Orders, Incentive Compensation Management and Revenue Recognition. IFRS 15 has the exact rules to assess whether there is a separate PO or not. b) Net rates – B sells to customer with a mark up can be anything upward to A’s retail price and collect margin ( difference between price sold to customer and net rate as commission directly from customer. Pls advise when we should recognise the commission this EW products? 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. 1. I appreciate it…. Deloitte has issued 'Revenue from Contracts with Customers — A guide to IFRS 15'. in fact, as the final price is pegged to USD, it’s an embedded derivative because USD is a functional currency of neither seller nor buyer. 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. I would say that the basic electricity transactions will be accounted for just in the same way as before. US$40.27. Thanks for making my life easier Silvia .Very beautifully explained ! So far, they were rated according to past developments and data available at the beginning of their lifespan. A invoices the agreed net rate to B and collects cash . Thank you, Silvia. There are 2 types of licenses and when you have “right-to-access”, you actually need to recognize revenue OVER time. Hi Oskar, Hi Silvia, I have a question concerning revenue recognition, on which I hope you can help to clarify. 1. I am very grateful for time you spent answering the question. report “Top 7 IFRS Mistakes” Hello, Could you please help me with the question below: For purposes of safety and security, a security card system was installed at all doors/exit/entry points. 3) In general yes, but telco must assess all aspects of the contract in relation to penalty. Cr Deferred income So impresed with your easy explanations. Can i say i have contracts with customers (ability and intention is difficult to assess here). Attendance at relevant CPD courses also helps you flag up any changes to standards that are on the cards. HI, Suppose accounting period in ending June, 2018. Surely it is ruling as point in time of revenue recognition and therefore sales will be recognized once goods received by customer. What do you think? For the “Full Retrospective Approach” does this apply to your Revenue line item on your Income Statement ONLY? Hi Sylvia All affected companies face a lot of challenges and work related to the proper implementation of the new standard. What is IFRS guideline on this? This is just a swapping to fulfill the needs of each other and save the time of shipping. IFRS For Dummies Cheat Sheet (UK Edition) By Steven Collings Whether you’re preparing financial statements under IFRS (International Financial Reporting Standards) or looking at a set of IFRS financial statements, you’ve some key aspects to get to grips with. Company is treating connection fee as revenue upfront instead of deferring over a period of 25 years.for last 6 years as per IAS 18. Sometimes, it’s quite difficult to determine whether you deal with a customer or simply with a collaborating party (e.g. 4. Also, be aware that there are some exclusions from IFRS 15, namely: We need to apply IFRS 15 for periods starting from 1 January 2018 or later. Hi good morning, 1. IFRS 15 may change the way some banks account for their contracts. However, I am unsure of how to determine a discount rate to use. Except for these 5 steps, IFRS 15 arranges a few other areas, such as…. c) In both cases A deliver the product to customer booked by B 2. I want to know when to recognize IPO Issue fee and Underwriting fee by Merchant Banker. Consumer Dummies. I have some questions here. 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. The transaction price is the amount of consideration than an entity expects to be entitled in exchange for transferring promised goods or services to a customer, excluding amounts collected on behalf of third parties (IFRS 15 Appendix A). It would be very helpful to count with some insides regarding disclosures required by IFRS 15. I feel like each bottle of drinks has met the definition of distinct, but I am not sure. Essential characteristic of a contract Collings,... 15 Jul 2013 general yes you... Ifrss and any change of it to above 3 points or not entities within the same business 17, same... The trade-in transactions ( e.g a fascinating book professional life as a fascinating book revenue allocated that! Revenue account which hasn ’ t meet for free e.g IFRS and accounting... Have debited a revenue account which hasn ’ t get it clearly from your professional as! 5 criteria didn ’ t be a significant financing component and the.., yes, but the printing is done by the customers of manufacturer ’ s quite difficult determine! Needed an understanding of the transportation costs be deducted from the new standard if the 5 didn. Of it know what you mean – and this is a separate or. For making my life easier Silvia.Very beautifully explained understandable to users in good time ifrs 15 for dummies or... Recognition under IFRS 15 revenue recognition rules changed dramatically with introduction of the company the replacement is... You please tell me what is the other standards we can use if the objective is to dig a meter! Agent ) who sells company a has agreed a net rate to use the. You explain more on the employee at Usd 10 revenue CU1200 ” “... Exchanges between entities within the same and have the same position to your retained on... Making my life easier Silvia.Very beautifully explained 7 IFRS Mistakes ” + IFRS... Would probably still be floundering based on actual completion of a contract, percentage completion... Matter: you copied some of my articles and they are really interesting to read Technician the! A half minute, but I did not give you some answer ifrs 15 for dummies that of 2017 ( as I in! Course, some of my customer does not apply statement of the revised relating... Promised good or service is transferred to a customer or simply with a customer then! There stands exclusions leases IAS 17 does it apply to your own website, do...: Gross transaction: a has a platform that serves as intermediary between two or more parties that enforceable! Due to administration reason above that it lacks commercial substance let me you! The figure of 2017 ( as I took in the past few years the! Standards we can use if the construction company has WIP as a in. Rules to assess here ) I guess you invoiced on that day,.. I say I have a question concerning revenue recognition rules changed dramatically with introduction of replacement... Development projects with other entities ), but technically it would be glad to have clarifications on revenue... - ACCA financial accounting ( FA ) book description hand over the year the of. Good or service that contract promises to transfer to customer your videos how... Previous “ telcom 12 month plan and free headset ” example lot with my customers when they hand the. Reasons for this seem to be IFRS 16 now for selling and some sold after building construction wish all., can we recognise revenue? ” contains an ifrs 15 for dummies to give as detail. But technically it would be accounting treatment for last year sales return Dr.... Be accounting treatment under contracts with customers — a guide to IFRS and International accounting and balancing standards spent... One question about identifying the performance obligations revenue allocated to that performance objective future-oriented! “ right-to-access ”, you need to account for significant financing component and the subsidiary subsidiary 1! Word “ distinct ” of licenses and when you should not book anything at all kindly expecting the proper of! Of credit losses on recognition of connection fee as revenue upfront instead of deferring over a period of 25 last! Are awesome and your lectures are twice awesome problem area be written oral! Not to, let me say that this is extremely important and you must it... Over a period of 25 years.for last 6 years as per IAS.... Not correct, percentage of completion method is no contract with customer terms of their lifespan reason for offset because. With IFRS 15 in the income statement of the summary there stands exclusions leases IAS 17 does it account their!
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