The most typical application of this criterion is in construction industry, when an asset is created or enhanced on the customer’s land. Excerpts from IFRS Standards come from the Official Journal of the European Union (© European Union, https://eur-lex.europa.eu). Paragraph 10 of IFRS 15: “A contract is an agreement between two or more parties that creates enforceable rights and obligations. Les normes IFRS sont fondées sur des principes. when the entity keeps the legal title until all receivables are paid by a customer. Variable consideration is also present if an entity’s right to consideration is contingent on the occurrence of a future event. A combined output or outputs might include more than one phase, element or unit (e.g. [IFRS 15:50] Variable consideration can arise, for example, as a result of discounts, rebates, refunds, credits, price concessions, incentives, performance bonuses, penalties or other similar items. 20. IFRS 15 requires a series of distinct goods or services that are substantially the same with the same pattern of transfer, to be regarded as a single performance obligation. Example. the entity has a contractual or legally enforceable right to receive reasonable compensation for performance completed to date if the contract were to be terminated before completion for reasons other than the entity’s failure to perform as promised. Leur expression conceptuelle déroute parfois l’utilisateur des comptes. Since, there may be … Entity X charges $5 million for the equipment and $0.5 million for the installation. This is another criterion that, if met, makes a performance obligation satisfied over time. At the reporting period, the package has already been transported to Berlin. Entity A should recognise revenue for the transportation completed to date (i.e. Mais dans le cas de la parution de la norme IFRS 15, l’enjeu est tel que l’IASB a jugé utile de détailler de nombreux cas de figure («illustrative examples» ou «IE»). Example: A series of distinct goods or services that are substantially the same. Une entité vend au grand public un service accessible pendant un an, accompagné d’un coût d’installation forfaitaire et non remboursable. All companies are impacted by the disclosure requirements of IFRS 15, the revenue standard. Over the past five years, we – like you – have wrestled with the many challenges of implementing IFRS 15. IFRScommunity.com is an independent website and it is not affiliated with, endorsed by, or in any other way associated with the IFRS Foundation. IFRS 15.B18 | ASC 606-10-55-20 state: Input methods recognise revenue on the basis of the entity’s efforts or inputs to the satisfaction of a performance obligation (for example, resources consumed, labour hours expended, costs incurred, time elapsed or machine hours used) relative to the total expected inputs to the satisfaction of that performance obligation. See Example 10 Case A, Example 11 Cases B/E and Example 55 and Example 56 Case B accompanying IFRS 15. At first, entities look at point a. and assess whether the good or service is capable of being distinct (more discussion on this point below). IFRS 15 Revenue from Contracts with Customers provides a single, principles-based five-step model that should be applied to determine how and when to recognise revenue from contracts with customers. Usually, the upfront fee does not result in the transfer of a distinct good or service to the customer and therefore it is not treated as a separate performance obligation. Pour lire la suite de cet article, connectez-vous à votre compte, En cas de problème avec votre compte abonné, merci de contacter abonnement(at)optionfinance.fr. A good or service which has been delivered may not be distinct if it cannot be used without another good or service that has not yet been delivered. If the answer is no, the good/service is not distinct. In other words, the entity is using the goods or services as inputs to produce or deliver the combined output or outputs specified by the customer. disregard potential contractual restrictions or practical limitations that otherwise would prevent the entity from transferring the remaining performance obligation to another entity; and. A good or service promised to the customer is not separately identifiable from other promises in the contract when, in substance, the customer contracted for a combined good or service. the entity’s promise to transfer the good or service to the customer is separately identifiable from other promises in the contract (in other words: the promise to transfer the good or service is distinct within the context of the contract). See also Examples 14, 15, 16 and 17 accompanying IFRS 15. For example, a gym membership is an obligation to stand-ready to provide the customer with access to the gym and its equipment. It contracts with a car producer to manufacture 1 million car seats over the next three years. Example: A series of distinct goods or services that are substantially the same. Only Entity X is able to install the equipment. Free smartphone is a distinct good and constitutes a separate performance obligation for the telecommunications company. Paragraph IFRS 15.29 lists three most common circumstances in which two or more promises to transfer goods or services to a customer are not separately identifiable (a non-exhaustive list): Non-refundable upfront fees should be assessed against the criteria for identifying a performance obligation which will determine their accounting treatment. See Example 11 Cases A/E, Example 12 and Example 56 Case A accompanying IFRS 15. Control is the ability to direct the use of, and obtain substantially all of the remaining benefits from, the asset, or to restrict the access of other entities to those benefits (IFRS 15.31-34). Paragraph IFRS 15.BC100 notes that the assessment of whether the customer can benefit from the goods or services on its own should be based on the characteristics of the goods or services themselves instead of the way in which the customer may use the goods or services. Les normes IFRS sont fondées sur des principes. IE188 Examples 36–37 illustrate the requirements in paragraphs 91–94 of IFRS 15 on incremental costs of obtaining a contract, paragraphs 95–98 of IFRS 15 on costs to fulfil a contract and paragraphs 99–104 of IFRS 15 on amortisation and impairment of contract costs. Additionally, it charges a one-off connection fee. If a performance obligation is not satisfied over time, it must be treated as satisfied at a point in time (IFRS 15.32). These examples represent how some of the disclosures required by IFRS 13 (in paragraphs 93 and IE60-63) in relation to fair value measurement might be tagged using detailed XBRL tagging. Example 15: Assets measured at Fair Value . Each car seat is a distinct good, but Entity A treats the whole contract as one performance obligation under paragraph IFRS 15.22(b). At a contract inception, entities need to identify the goods or services promised in that contract. IFRS 15 sets out a single and comprehensive framework for revenue recognition, The guidance in IFRS 15 is considerably more detailed than existing IFRSs for revenue recognition (IAS 11 Construction Contracts and IAS 18 Revenue and associated Interpretations), including extensive application guidance and illustrative examples. A telecommunications company promises a free smartphone to each customer who subscribes for a premium telecommunications service. Transfer of physical possession is another indication of transfer of control, but there are notable exceptions: Requirements relating to repurchase agreements can be summarised as follows: Transfer of significant risks and rewards of ownership of the asset is an indication of transfer of control. The entity’s performance does not create an asset with an alternative use to the entity and the entity has an enforceable right to payment for performance completed to date. En échange de ce coût initial et ponctuel, l’entité ne transfère ni un bien ni un service, ce qui ne crée aucune «obligation de performance». Your essential guide to the revenue disclosures. If the answer is yes, the good/service is distinct. The setup of manufacturing line is not a distinct service and does not constitute a separate performance obligation as it does not result in a transfer of goods or services to the customer. For some goods or services, such as a piece of furniture, it is obvious that a customer will benefit from them on their own. Updated September 2019 A closer look at IFRS 15, the revenue recognition standard 2 Overview The largely converged revenue standards, IFRS 15 Revenue from Contracts with Customers and Accounting Standards Codification (ASC) 606, Revenue from Contracts with Customers1 (together with IFRS 15, the standards), that were issued in 2014 by the International Accounting Standards Board (IASB La parution d’IFRS 15 en mai 2014 s’accompagne d’un recueil de 63 exemples pour illustrer les conséquences pratiques attendues. In making this assessment an entity should (IFRS 15.B4): IASB stated that this criterion for performance obligation satisfied over time is not intended to be applied when an asset (e.g. IFRS 15 - Application Example in Incremental Costs to Obtain (more details, check www.bdo.co.uk) IAS 2 Inventories, IAS 16 Property, Plant and Equipment or IAS 38 Intangible Assets cover the accounting treatment on costs incurred in fulfilling a contract with a customer. L’entité conclut que l’option de renouvellement n’est pas un droit particulier dont le client pourrait se prévaloir en dehors du contrat. › IFRS 15 – Illustrative disclosures. A performance obligation is a promise to transfer to the customer a good or service (or a bundle of goods or services) that is distinct (IFRS 15.22). Amendments to IFRS 15 Revenue from Contracts with Customers Paragraphs 26, 27 and 29 are amended. IFRS 15 prescribers the 5-step model for the revenue recognition. direct labour hours, time elapsed or resources consumed. Enforceability of the rights and obligations in a contract is a matter of law. CLARIFICATIONS TO IFRS 15 REVENUE FROM CONTRACTS WITH CUSTOMERS—APRIL 2016 Amendments to the Illustrative Examples on IFRS 15 Revenue from Contracts with Customers Paragraphs IE45, IE47, IE50–IE51, IE55–IE57, IE61, IE63, IE225–IE227, IE230–IE232, IE237–IE238, IE240–IE245, IE247–IE248, IE275, IE277–IE280, IE286–IE287, IE290–IE294, IE296, IE299–IE300, … Découvrez toutes nos offres d'abonnement et accédez à nos articles et dossiers en ligne. Each of the goods or services is significantly affected by one or more of the other goods or services in the contract (they are highly interdependent or highly interrelated). Revenue is recognised when/as performance obligations are satisfied in the amount of transaction price allocated to satisfied performance obligations (IFRS 15.46). Such a bundle is then treated as a single performance obligation (IFRS 15.30). 41 . These examples represent how some of the disclosures required by IFRS 13 (in paragraphs 93 and IE60-63) in relation to fair value measurement might be tagged using detailed XBRL tagging. IFRS 15 applies to all contracts with customers, except for those that are within the scope of other IFRSs. It would not provide meaningful results if the gym tried to assess the number of hours that the customer will use throughout the contract and recognise revenue based on actual/total ratio. by past business practices or published policies) that create a valid expectation of the customer that the entity will transfer a distinct good or service are also treated as separate performance obligations, even though they may not be enforceable by law (IFRS 15.24, BC87). One or more of the goods or services significantly modifies or customises, or are significantly modified or customised by, one or more of the other goods or services promised in the contract (e.g. if a performance obligation does not meet the criteria of being satisfied over time, it is assumed to be satisfied at a point in time. It does not matter whether the production will be spread evenly over time or not. IFRS 15 Thematic (September 2020) Financial Reporting Council 2 Page 1. IFRS 15 does not have any specific provisions on onerous (loss-making) contracts, therefore these IAS 37 requirements apply. each distinct good or service in the series would meet the criteria to be a. A performance obligation can be satisfied (and revenue recognised) at a point in time or over time. take stock – to pull together, in one place, what we have learned about this new world of revenue recognition. Identifying performance obligations is critical to revenue recognition under IFRS 15. The standard was published in May 2014 and is effective from 1 January 2018. Paragraphs 28 and 30 have not been amended but have been included for ease of … The following decision should be used to determine whether multiple contracts should be combined or not: Example – Combination of contracts . This may be a very useful practical expedient as it effectively applies also to determining the transaction price and allocating it to performance obligations. An exception to this rule applies when the entity can objectively determine that the agreed specifications are met, such as weight or size (IFRS 15.B83-B85). Mais dans le cas de la parution de la norme IFRS 15, l’enjeu est tel que l’IASB a jugé utile de détailler de nombreux cas de figure («illustrative examples» ou «IE»). direct the use of and asset (which includes restricting another entity from using an asset), and. presume that another entity fulfilling the remainder of the performance obligation would not have the benefit of any asset that is presently controlled by the entity and that would remain controlled by the entity if the performance obligation were to transfer to another entity. Bien que d’application obligatoire à partir du 1er janvier 2017, il est fortement conseillé d’engager les travaux d’implémentation sans délai. Example – Volume discount incentive This is an adaptation from IFRS 15, Illustrative examples, Example 24. Only one method should be used for measuring progress for a particular performance obligation and also for performance obligations with similar characteristics (IFRS 15.BC161). 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