KeyDi

ff
erence–I
FRS15v
sIAS18

BothIFRS15–‘ Revenuefrom Cont ractswithCust omer s’andI AS18- ‘

Revenue’rel
at etothe
accounti
ngtreatment sonr ecordingi ncomegener at
edt hr oughbusinessactivi
ti
es.IAS18was
i
ssuedinDecember1993, andI FRS15wi llbeef f
ecti
vef oraccount i
ngper i
odsst ar
tingfrom
January2018.Thekeydi f
ferencebet weenI FRS15andI AS18i sthatwhileIFRS15pr ovi
desa
standar
disedfi
v e-
stepmodel tor ecognizeal lt
ypesofr ev enueearnedf r
om customercont r
act
s,
IAS18considersdifferentrecogni t
ioncr i
teri
af oradiff
er enttypeofincomesr eceived.From
January2018,IAS18wi l
lber eplacedbyI FRS15.

CONTENTS

1.Ov
erv
iewandKeyDi
ff
erence

2.Whati
sIFRS15

3.Whati
sIAS18

4.Si
debySi
deCompar
ison–I
FRS15v
sIAS18

5.Summar
y

Whati
sIFRS15

Thisisthenewst andardestabl
ishedbyIASB(I
nternat
ionalAccountingStandar
dsBoard)for
revenuerecogni
tion.Theunderl
y i
ngpri
ncipl
eofthi
sstandardist hatthecompanyshould
recogni
zeandr ecordrevenueinawayt hati
ndi
catesthetransferofgoodsorservi
ces.

Thef
oll
owi
ngst
andar
dswi
l
lal
sober
epl
acedbyI
FRS15i
naddi
ti
ont
oIAS18.

I
AS11Const
ruct
ionCont
ract
s

SI
C31Rev
enue–Bar
terTr
ansact
ionI
nvol
vi
ngAdv
ert
isi
ngSer
vices

I
FRI
C13Cust
omerLoy
alt
yPr
ogr
ams

I
FRI
C15Agr
eement
sfort
heConst
ruct
ionofReal
Est
ateand

I
FRI
C18Tr
ansf
erofAsset
sfr
om Cust
omer
s
Fi
ve-
StepModel
toRecogni
zeRev
enue

Thef
oll
owi
ng5st
epsshoul
dbeusedunderI
FRS15t
orecogni
zer
evenue.

St
ep1:
Ident
if
ythecont
ract
(s)wi
thacust
omer
.

St
ep2:
Ident
if
ytheper
for
manceobl
i
gat
ionsi
nthecont
ract
.

St
ep3:
Det
ermi
net
het
ransact
ionpr
ice.

St
ep4:
All
ocat
ethet
ransact
ionpr
icet
otheper
for
manceobl
i
gat
ionsi
nthecont
ract
.

St
ep5:
Recogni
zer
evenuewhen(
oras)t
heent
it
ysat
isf
iesaper
for
manceobl
i
gat
ion.

I
ntheabov
epr
ocess,

Cont
racti
stheagreementbet
weent
hebuy
er(
cust
omer
)andt
hesel
l
er(
company
)toconducta
busi
nesst
ransact
ion

Performanceobl
i
gat
ioni
sapromiseint
hecont
ractf
orthecompanytotr
ansf
erapre-agr
eed
amountofgoodsorserv
icest
othecust
omeronanagreedti
mesubject
edtheint
endedqual
it
y
requir
ements.

Alltheabov
ecr i
ter
iashoul
dbemetinordertorecordtherev
enueunderIFRS15.I
fei
therof
theserequi
rementsisnotmet,t
hecontr
actshouldbefurt
hereval
uatedandshoul
dbeamended
torefl
ectaproperbusi
nesstr
ansact
ionfr
om whichincomewoul dberecei
ved.

Whati
sIAS18?

Int
roducedbyI
ASC(I
nternat
ional
Account
ingStandar
dsCouncil
)IAS18st atesthatr
evenue
shouldbeval
uedatf
airv
alueoftheamountsoffundsrecei
vedorrecei
vable.Thismeans,

Thef
utur
eeconomi
cbenef
iti
sassoci
atedwi
tht
hei
nfl
owoff
unds.

Theamountofr
evenuecanbemeasur
edwi
thr
eli
abi
l
ity
.

I
AS18pr
ovi
desaccount
inggui
del
i
nest
orecor
drev
enuegener
atedf
rom t
hef
oll
owi
ngact
ivi
ti
es.

Sal
eofGoods
Revenuearisingf rom sel
li
nggoodsisconsi
der
edher e;
thus,t
histy
peofr ev
enueisr
ecognized
bymanuf acturingor gani
zati
ons.I
naddi
ti
ontotheeconomi cbenef
itandfai
rval
uecrit
eri
a,al
l
theri
sksandr ewar dsofthegoodshavetobet
ransferr
edtothebuy erwher
ethesel
lerexert
sno
fur
thercontrol overthegoodssold.

Per
for
mingaSer
vice

Aservi
cecontractcanbeal engt
hyonewherei
tmaybedeliv
er edwit
hinanumberofyear
s.
Thus,
thestageofcompl et
ionshouldbeabl
etobev
aluedrel
iablyandthepropor
ti
onofcost
s
i
ncurr
edforthatspecif
icaccounti
ngperi
odhast
oberecognized.

I
nter
est
,Roy
alt
iesandDi
vi
dends

I
naddit
iontot
hepr
inci
pler
ecogni
ti
oncr
it
eri
a,t
hef
oll
owi
ngshoul
dbeconsi
der
edf
oreacht
ype
ofr
evenue.

I
nterest–usi
ngtheef
fect
ivei
nter
estmet
hodassetouti
nIAS39(
Financi
alI
n­st
ru­ment
s:
Recog­ni­tionandMea­sure­ment)

Roy
alt
ies–onanaccr
ual
sbasi
sinaccor
dancewi
tht
hesubst
anceoft
her
elev
antagr
eement

Di
vi
dends–whent
heshar
ehol
der
’sr
ightt
orecei
vepay
menti
sest
abl
i
shed

Di
ff
erenceBet
weenI
FRS15andI
AS18

I
AS18contai
nspr
inci
plesf
orr evenuerecogni
ti
on,
buttheyarequit
ebroadandasaresul
t,
manycompani
esusethei
rjudgmentt oapplyt
hem tot
heirspeci
fi
csit
uati
on.Thi
sisoneofthe
mai
nreasonsf
orI
AS18t ober eplacedbyIFRS15.

Summar
y–I
FRS15v
sIAS18

Themai ndi ff
erencebetweenIFRS15andI AS18per t
ainstotherevi
sionoft heaccount i
ng
cri
teri
aov ertimeinordertoprovi
demor erelevantandaccurateinf
ormationt otheuser sof
fi
nancial statements.Thisi
sacommonpr act i
cewhennat ureofthebusinesst ransactionsar e
becomi ngmor ecompl exdaybyday.Whilediffer
enttypesofrevenuearer ecognizedi nv ar
ious
way sunderI AS18,thenewstandard,I
FRS15at temptstoall
owuni f
ormityinr ecognizingall
ty
pesofr ev enue.Thesuccessorfai
lur
eoft hiscanbeonl ydeter
minedoncei tisimplement ed.