IFRS 15, Revenue from Contracts with Customers

Please see the Model Financial Statements for more detail of this standard applied to financial statements.

The following is just a basic summary of IFRS 15 that I made for myself to help me study:

  1. Identifying the contract
  • Definition of a contract – an agreement between two or more parties that creates enforceable rights and obligations.





  • Requirements are:

– The parties to the contract have approved the contract and are committed to performing their obligations.

-The entity can identify each party’s rights regarding the goods or services to be transferred.

-The entity can identify the payment terms for the goods or services to be transferred.

-The contract has commercial substance.

-It is probable that the entity will collect the consideration to which it will be entitled in exchange for the goods or services that will be transferred to the customer.

2.Identifying performance obligations

  • a good or service (or a bundle of goods or services) – distinct:
    – the customer can benefit from the good or service either on its own or together with other resources that are readily available to the customer

– the entity’s promise to transfer the good or service to the customer is separately identifiable from other promises in the contract

  • a series of distinct goods or services that are substantially the same and that have the same pattern of transfer to the customer:

– performance obligation satisfied over time

same method used to measure the entity’s progress towards complete satisfaction of the performance obligation.

3. Determining the transaction price

  • 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, excluding amounts collected on behalf of third parties.
  • Significant financing component:
    Time value of money – entity shall adjust the promised amount of consideration if the timing of payments agreed to by the parties to the contract (either explicitly or implicitly) provides the customer or the entity with a significant benefit of financing the transfer of goods or services to the customer. Finance income is not recognised as revenue, show separately!
  • Practical expedient – an entity need not adjust the promised amount of consideration for the effects of a significant financing component if the entity expects, at contract inception, that the period between when the entity transfers a promised good or service to a customer and when the customer pays for that good or service will be one year or less.
  • Calculate the transaction price on either

– the expected value method: sum of probability-  weighted amounts in a range of possible consideration amounts; or

– The most likely amount: single most likely amount in a range of possible consideration amounts (ie the single most likely outcome of the contract).

4. Allocating the transaction price to performance obligations

  • Stand-alone selling prices – Determine the stand-alone selling price at contract inception of the distinct good or service underlying each performance obligation in the contract and allocate the transaction price in proportion to those stand-alone selling prices.
  • Discount – allocate a discount proportionately to all performance obligations in the contract unless there is observable evidence that the entire discount relates to only one or more performance obligations.

5. Satisfying performance obligations

  • Control – ability to direct the use of, and obtain substantially all of the remaining benefits from, the asset, as well as to prevent other entities from directing the use of, and obtaining the benefits from that asset.
  • Satisfied over time, if either:
    – the customer simultaneously receives and consumes the benefits provided;

– the entity’s performance creates or enhances an asset; or

– the entity’s performance does not create an asset with an alternative use to     the entity

  • Specified point in time – indicators of the transfer of control:
    – The entity has a present right to payment for the asset

– The customer has legal title to the asset

– The entity has transferred physical possession of the asset

– The customer has the significant risks and rewards of ownership of the asset – The customer has accepted the asset

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