Start Searching the Answers
The Internet has many places to ask questions about anything imaginable and find past answers on almost everything.
How are the second and fourth steps in the revenue recognition process different from one another? The second step works to outline the performance obligations, while the fourth step discusses the transaction prices associated with the obligations.
What happens if the measure of the remaining performance obligations exceeds the measure of the rights remaining? The contract will be considered an asset. Revenue guidance should be applied.
Identifying the contract or contracts with a customer is the first step in the new framework for determining revenue recognition. Under existing guidance, persuasive evidence of an arrangement typically does not exist until both parties have signed a contract.
The core principle of IFRS 15 is that revenue is recognised when the goods or services are transferred to the customer, at the transaction price. Revenue is recognised in accordance with that core principle by applying a 5-step model as shown below.
The five revenue recognition steps of IFRS 15 – and how to apply them.
The objective of IFRS 15 is to establish the principles that an entity shall 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.
Scope overview IFRS 15 is a comprehensive standard covering revenue from contracts with customers. Paragraph IFRS 15.5 lists contracts to which IFRS 15 does not apply. These are mainly contracts within the scope of other IFRS.
IFRS 15 is the new standard on revenue recognition. This standard may become a point of reference for investors. Implementation of IFRS 15 may significantly impact revenue and profitability levels and trends. Furthermore, it may have broader implications on tax positions, loan covenants and KPIs.
IFRS 15 is based on a core principle that requires an entity to recognise revenue in a manner that depicts the transfer of goods and services to customers at an amount that reflects the consideration the entity expects to be entitled to in exchange for those goods or services.
IFRS 15 was also issued in 2014. It replaces two Standards, IAS 18 Revenue and IAS 11 Construction Contracts. IFRS 9 and IFRS 15 are effective for reporting periods starting on or after 1 January 2018.
With IFRS 15, the price for the smart phone is recognised as revenue as soon as it is handed over to the customer. IFRS 16 is the ‘leases’ standard and is to be applied as of 1 January 2019, however early application is permitted if adopted with IFRS 15.
The objective of IFRS 16 is to report information that (a) faithfully represents lease transactions and (b) provides a basis for users of financial statements to assess the amount, timing and uncertainty of cash flows arising from leases.
1 January 2019
The introduction of new requirements in IFRS 9 Financial Instruments will be a significant change to the financial reporting of banks. IFRS 9 replaces IAS 39 Financial Instruments: Recognition and Measurement, and is effective for annual periods beginning on or after January 1, 2018. Earlier application is permitted.
IFRS 9 is an International Financial Reporting Standard (IFRS) published by the International Accounting Standards Board (IASB). It contains three main topics: classification and measurement of financial instruments, impairment of financial assets and hedge accounting.
IFRS 9 provides guidance on how to determine whether a business model is to manage assets to collect contractual cash flows or to both collect contractual cash flows and to sell financial assets.
IFRS 9 is the International Accounting Standards Board’s (IASB) response to the financial crisis, aimed at improving the accounting and reporting of financial assets and liabilities. IFRS 9 replaces IAS 39 with a unified standard. The classification and measurement of financial assets.
Credit risks involve fair market value fluctuations of the entities financial liabilities. IFRS 7 states that entities need to value the instruments at year-end rates, accumulating all instruments into one aggregate figure. IFRS 9 replaced IAS 39 and must be implemented beginning January 1, 2013.
The ECL model relies on a relative assessment of credit risk. This means that a loan with the same characteristics could be included in Stage 1 for one entity and in Stage 2 for another, depending on the credit risk at initial recognition of the loan for each entity.
The International Financial Reporting Standards (IFRS) are accounting standards that are issued by the International Accounting Standards Board (IASB) with the objective of providing a common accounting language to increase transparency in the presentation of financial information.
The objectives of the IFRS Foundation are: to develop, in the public interest, a single set of high quality, understandable, enforceable and globally accepted financial reporting standards based upon clearly articulated principles.