REVENUE FROM CONTRACT WITH

CUSTOMERS – IFRS – 15
Objective
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. [IFRS 15:1] Application of the
standard is mandatory for annual reporting periods starting from 1 January 2018 onwards. Earlier
application is permitted.
This IFRS replaces
IAS 11 Construction contracts
IAS 18 Revenue
IFRIC 13 Customer loyalty programs
IFRIC 15 Agreements for the of real estate
IFRIC 18 Transfer of assets from customers
SIC 31 Revenue-barter transactions involving advertising services
Scope
IFRS 15 Revenue from Contracts with Customers applies to all contracts with customers except for:
leases within the scope of IAS 17 Leases; financial instruments and other contractual rights or
obligations within the scope of IFRS 9 Financial Instruments, IFRS 10 Consolidated Financial
Statements, IFRS 11 Joint Arrangements, IAS 27 Separate Financial Statements and IAS
28 Investments in Associates and Joint Ventures; insurance contracts within the scope of IFRS
4 Insurance Contracts; and non-monetary exchanges between entities in the same line of business
to facilitate sales to customers or potential customers.
A contract with a customer may be partially within the scope of IFRS 15 and partially within the
scope of another standard. In that scenario:
a) if other standards specify how to separate and/or initially measure one or more parts of
the contract, then those separation and measurement requirements are applied first. The
transaction price is then reduced by the amounts that are initially measured under other
standards;
b) if no other standard provides guidance on how to separate and/or initially measure one
or more parts of the contract, then IFRS 15 will be applied.
Definitions
An agreement between two or more parties that creates enforceable rights and obligations.
A party that has contracted with an entity to obtain goods or services that are an output of the
entity’s ordinary activities in exchange for consideration. Increases in economic benefits during
the accounting period in the form of inflows or enhancements of assets or decreases of liabilities
that result in an increase in equity, other than those relating to contributions from equity
participants.
A promise in a contract with a customer to transfer to the customer either:
a) a good or service (or a bundle of goods or services) that is distinct; or
b) a series of distinct goods or services that are substantially the same and that have the
same pattern of transfer to the customer.
Income arising in the course of an entity’s ordinary activities.
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.
Accounting requirements for revenue

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The five-step model framework
The core principle of IFRS 15 is that an entity will recognize revenue to depict the transfer of
promised goods or services to customers in an amount that reflects the consideration to which
the entity expects to be entitled in exchange for those goods or services. This core principle is
delivered in a five-step model framework:
a) Identify the contract(s) with a customer
b) Identify the performance obligations in the contract
c) Determine the transaction price
d) Allocate the transaction price to the performance obligations in the contract
e) Recognize revenue when (or as) the entity satisfies a performance obligation.
Application of this guidance will depend on the facts and circumstances present in a contract
with a customer and will require the exercise of judgment.
Step 1: Identify the contract with the customer
A contract with a customer will be within the scope of IFRS 15 if all the following conditions are
met:
i) the contract has been approved by the parties to the contract;
ii) each party’s rights in relation to the goods or services to be transferred can be identified;
iii) the payment terms for the goods or services to be transferred can be identified;
iv) the contract has commercial substance; and
v) it is probable that the consideration to which the entity is entitled to in exchange for the
goods or services will be collected.
If a contract with a customer does not yet meet all of the above criteria, the entity will continue
to re-assess the contract going forward to determine whether it subsequently meets the above
criteria. From that point, the entity will apply IFRS 15 to the contract.
Combining contracts
In most cases, entities will apply the model to individual contracts with a customer. However, the
standard requires entities to combine contracts entered into at, or near, the same time with the
same customer if they meet one or more of the criteria outlined below:
An entity shall combine two or more contracts entered into at or near the same time with the
same customer (or related parties of the customer) and account for the contracts as a single
contract if one or more of the following criteria are met:
(a) the contracts are negotiated as a package with a single commercial objective;
(b) the amount of consideration to be paid in one contract depends on the price or
performance of the other contract; or
(c) the goods or services promised in the contracts (or some goods or services promised in
each of the contracts) are a single performance obligation.
Contract modifications
A contract modification is a change in the scope or price (or both) of a contract that is approved
by the parties to the contract. If the parties to the contract have not approved a contract
modification, an entity shall continue to apply this Standard to the existing contract until the
contract modification is approved.
An entity shall account for a contract modification as a separate contract if both of the following
conditions are present:
(a) the scope of the contract increases because of the addition of promised goods or services
that are distinct ; and
(b) the price of the contract increases by an amount of consideration that reflects the entity’s
stand-alone selling prices of the additional promised goods or services and any
appropriate.
If a contract modification is not accounted for as a separate contract, an entity shall account for
the promised goods or services not yet transferred at the date of the contract modification in
whichever of the following ways is applicable:

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(a) An entity shall account for the contract modification as if it were a termination of the
existing contract and the creation of a new contract, if the remaining goods or services
are distinct from the goods or services transferred on or before the date of the contract
modification. The amount of consideration to be allocated to the remaining performance
obligations is the sum of: -
(i) the consideration promised by the customer (including amounts already received
from the customer) that was included in the estimate of the transaction price and
that had not been recognized as revenue; and
(ii) the consideration promised as part of the contract modification.
(b) An entity shall account for the contract modification as if it were a part of the existing
contract if the remaining goods or services are not distinct and, therefore, form part of a
single performance obligation.
(c) If the remaining goods or services are a combination of items (a) and (b), then the entity
shall account for the effects of the modification on the unsatisfied (including partially
unsatisfied) performance obligations in the modified contract in a manner that is
consistent with the objectives of this paragraph.
When a contract with a customer does not meet the criteria and an entity receives consideration
from the customer, the entity shall recognize the consideration received as revenue only when
either of the following events has occurred:
(a) the entity has no remaining obligations to transfer goods or services to the customer and
all, or substantially all, of the consideration promised by the customer has been received
by the entity and is non-refundable; or
(b) the contract has been terminated and the consideration received from the customer is
non-refundable.
An entity shall recognize the consideration received from a customer as a liability.
Step 2: Identify the performance obligations in the contract
At the inception of the contract, the entity should assess the goods or services that have been
promised to the customer, and identify as a performance obligation:
i) a good or service (or bundle of goods or services) that is distinct; or
ii) a series of distinct goods or services that are substantially the same and that have the
same pattern of transfer to the customer.
A series of distinct goods or services is transferred to the customer in the same pattern if both of
the following criteria are met:
i) each distinct good or service in the series that the entity promises to transfer consecutively
to the customer would be a performance obligation that is satisfied over time (see
below); and
ii) a single method of measuring progress would be used to measure the entity’s progress
towards complete satisfaction of the performance obligation to transfer each distinct
good or service in the series to the customer. A good or service is distinct if both of the
following criteria are met:
a) the customer can benefit from the good or services on its own or in conjunction with
other readily available resources; and
b) the entity’s promise to transfer the good or service to the customer is separately
identifiable from other promises in the contract.
Factors for consideration as to whether a promise to transfer goods or services to the customer is
not separately identifiable include, but are not limited to:
i) the entity does provide a significant service of integrating the goods or services with other
goods or services promised in the contract;
ii) the goods or services significantly modify or customize other goods or services promised in
the contract;
iii) the goods or services are highly interrelated or highly interdependent.

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EXAMPLE
Company Y has a contract to build a house, a process that requires a number of different goods
and services. Generally, those goods would meet criterion 1, because the customer could benefit
from each individual brick or widow in conjunction with other readily available resources.
However, criterion 2 is not met for each brick and window, because company Y provides a service
of integrating those goods into combined output. The goods and services used to build the house
are therefore, combined and accounted for as one performance obligation.
By contrast, Company Z has a contract to license and jointly promote a drug in a specified region.
The license may be deemed a performance obligation because its use is not highly dependent
on or highly inter related with the co-promotion activity. This is because another party could
provide the co-promotion activity and the license could be used without it.
Step 3: Determine the transaction price
The transaction price is the amount to which an entity expects to be entitled in exchange for the
transfer of goods and services. When making this determination, an entity will consider past
customary business practices.
Where a contract contains elements of variable consideration, the entity will estimate the amount
of variable consideration to which it will be entitled under the contract.
Variable consideration can arise, for example, as a result of discounts, rebates, refunds, credits,
price concessions, incentives, performance bonuses, penalties or other similar items. Variable
consideration is also present if an entity’s right to consideration is contingent on the occurrence
of a future event.
The standard deals with the uncertainty relating to variable consideration by limiting the amount
of variable consideration that can be recognized. Specifically, variable consideration is only
included in the transaction price if, and to the extent that, it is highly probable that its inclusion will
not result in a significant revenue reversal in the future when the uncertainty has been
subsequently resolved.
However, a different, more restrictive approach is applied in respect of sales or usage-based
royalty revenue arising from licenses of intellectual property. Such revenue is recognized only
when the underlying sales or usage occur.
Example-timing of recognition of variable consideration
Company R has a contract to sell products through a distributor where:-
- the distributor has a right of return if it cannot sell the products; and
- revenue is currently recognized by company R when distributor resells the products to end
users.
Under the new IFRS, revenue may be recognized by company R earlier on the sale to the
distributor i.e. sell-in based on historical experience of the number of products for which it is highly
probable that they will not return.
Example on variable consideration
Entity A operates outsourced call centers for retail and manufacturing companies. It is
compensated through fixed minimum amounts plus variable amounts based on average
customer wait times.
Entity A negotiates a new three-year contract with a customer it has been serving for the past six
years. The contract states that the fixed amounts payable for annual services are CU12,000,000
per year and CU10 per call for calls in excess of 1,200,000. Entity A also is able to earn annual
bonus payments of CU1,200,000 if the average annual customer wait time is less than four minutes.
Entity A determines that the call center service for 3,600,000 calls (1,200,000 calls annually) is the
only performance obligation in the arrangement. That is, the option to obtain services on
additional calls is not an option that provides the customer a material right (because it is priced
at the same rate per call as the 3,600,000 calls).
Furthermore, based on historical experience, Entity A does not expect the volume of calls to
exceed 1,200,000 calls annually. To estimate the total transaction price, Entity A would consider
all reasonably available information, including its past performance on similar contracts. Based on

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that information, Entity A expects average wait time to be less than 4 minutes each year
throughout the three-year contract. Therefore, the entity estimates the total transaction price as
CU39,600,000 [(CU12,000,000 x 3) + (CU1,200,000 x 3)].
Entity A would account for the three-year contract as a single performance obligation and would
recognize revenue based on the proportion of calls completed to the total number of calls
expected up to 1,200,000 calls annually. Entity A determines that it is entitled to the full estimated
transaction price because it is probable that a significant revenue reversal for that amount will not
occur; thus, it would recognize as revenue CU11 (CU39,600,000 / 3,600,000) per call as the service
is provided. Note, if Entity A expected the volume of calls to exceed 1,200,000 calls in any one
year, Entity A would have to include those calls (and the expected consideration) in the total
transaction price so that the expected additional consideration from the calls in excess of
3,600,000 is allocated across all expected calls.
Under current IFRS, entities may have deferred recognition of the bonus to a later date, when the
uncertainty is resolved. Therefore, entities may have only recognized the fixed revenue of CU10
(CU12,000,000 _/ 1,200,000) per call and at the end of each year, would recognize the amount of
the bonus it has earned. This results in less revenue recorded in the first three quarters of each year
(assuming the call volume is fairly even throughout the year) due to the uncertainty about the
bonus payment.
Step 4: Allocate the transaction price to the performance obligations in the contracts
Where a contract has multiple performance obligations, an entity will allocate the transaction
price to the performance obligations in the contract by reference to their relative standalone
selling prices.
If a standalone selling price is not directly observable, the entity will need to estimate it. IFRS 15
suggests various methods that might be used, including:
a) Adjusted market assessment approach
b) Expected cost plus a margin approach
c) Residual approach (only permissible in limited circumstances).
Any overall discount compared to the aggregate of standalone selling prices is allocated
between performance obligations on a relative standalone selling price basis. In certain
circumstances, it may be appropriate to allocate such a discount to some but not all of the
performance obligations.
Where consideration is paid in advance or in arrears, the entity will need to consider whether the
contract includes a significant financing arrangement and, if so, adjust for the time value of
money. A practical expedient is available where the interval between transfer of the promised
goods or services and payment by the customer is expected to be less than 12 months.
Example-allocating the selling price
Manufacturing Co. entered into a contract with a customer to sell a machine for CU100,000. The
total contract price included installation of the machine and a two-year extended warranty.
Assume that Manufacturing Co. determined there were three distinct performance obligations
and the stand-alone selling prices of those performance obligations were as follows:
machine — CU75,000, installation services — CU14,000 and extended warranty — CU20,000.
The aggregate of the stand-alone selling prices (CU109,000) exceeds the total transaction price
of CU100,000, indicating there is a discount inherent in the arrangement. That discount must be
allocated to each of the individual performance obligations based on the relative stand-alone
selling price of each performance obligation. Therefore, the amount of the CU100,000 transaction
price is allocated to each performance obligation as follows:
Machine — CU68,807 (CU75,000 x (CU100,000 / CU109,000))
Installation — CU12,844 (CU14,000 x (CU100,000 / CU109,000))
Warranty — CU18,349 (CU20,000 x (CU100,000 / CU109,000))
The entity would recognize as revenue the amount allocated to each performance obligation
when (or as) each performance obligation is satisfied.

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Example- application of the residual approach
Company Y has a contract to sell software product and post contract customer support (PCS) for
the product. The standalone selling price of the PCS is observable based on services sold
separately in similar circumstances to similar customers, and although they do not have the tight
brand of prices, the observable prices are not highly variable.
However, the software is not sold separately and based on past transactions its selling price is
highly variable. Therefore, company Y applies the residual approach, estimating the stand alone
selling price of the software using the total transaction price less the stand alone selling price of
the PCS. In this case, any discount in the arrangement is allocated to the software product.
Step 5: Recognize revenue when (or as) the entity satisfies a performance obligation
Revenue is recognized as control is passed, either over time or at a point in time. Control of an
asset is defined as the ability to direct the use of and obtain substantially all of the remaining
benefits from the asset. This includes the ability to prevent others from directing the use of and
obtaining the benefits from the asset. The benefits related to the asset are the potential cash flows
that may be obtained directly or indirectly. These include, but are not limited to:
i) using the asset to produce goods or provide services;
ii) using the asset to enhance the value of other assets;
iii) using the asset to settle liabilities or to reduce expenses;
iv) selling or exchanging the asset;
v) pledging the asset to secure a loan; and
vi) holding the asset.
An entity recognizes revenue over time if one of the following criteria is met:
i) the customer simultaneously receives and consumes all of the benefits provided by the
entity as the entity performs;
ii) the entity’s performance creates or enhances an asset that the customer controls as the
asset is created; or
iii) 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.
If an entity does not satisfy its performance obligation over time, it satisfies it at a point in time.
Revenue will therefore be recognized when control is passed at a certain point in time. Factors
that may indicate the point in time at which control passes include, but are not limited to:
i) the entity has a present right to payment for the asset;
ii) the customer has legal title to the asset;
iii) the entity has transferred physical possession of the asset;
iv) the customer has the significant risks and rewards related to the ownership of the asset;
and
v) the customer has accepted the asset.
Example-Customer loyalty programs
An entity has a customer loyalty programs that rewards a customer with one customer
loyalty point for every CU10 of purchases. Each point is redeemable for a CU1 discount
on any future purchases of the entity’s products. During a reporting period, customers
purchase products for CU100,000 and earn 10,000 points that are redeemable for future
purchases. The consideration is fixed and the stand-alone selling price of the purchased
products is CU100,000. The entity expects 9,500 points to be redeemed. The entity
estimates a stand-alone selling price of CU0.95 per point (totaling CU9,500) on the basis
of the likelihood of redemption.
The points provide a material right to customers that they would not receive without
entering into a contract. Consequently, the entity concludes that the promise to provide
points to the customer is a performance obligation. The entity allocates the transaction
price (CU100,000) to the product and the points on a relative stand-alone selling price
basis as follows:

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 CU
Product 91,324 [CU100,000 × (CU100,000 stand-alone selling price ÷
CU109,500)]
Points 8,676 [CU100,000 × (CU9,500 stand-alone selling price ÷
CU109,500)]
At the end of the first reporting period, 4,500 points have been redeemed and the entity
continues to expect 9,500 points to be redeemed in total. The entity recognizes revenue
for the loyalty points of CU4,110 [(4,500 points ÷ 9,500 points) × CU8,676] and recognizes
a contract liability of CU4,566 (CU8,676 – CU4,110) for the unredeemed points at the end
of the first reporting period.
At the end of the second reporting period, 8,500 points have been redeemed
cumulatively. The entity updates its estimate of the points that will be redeemed and now
expects that 9,700 points will be redeemed. The entity recognizes revenue for the loyalty
points of CU3,493 {[(8,500 total points redeemed ÷ 9,700 total points expected to be
redeemed) × CU8,676 initial allocation] – CU4,110 recognized in the first reporting period}.
The contract liability balance is CU1,073 (CU8,676 initial allocation – CU7,603 of
cumulative revenue recognized).
Contract costs
The incremental costs of obtaining a contract must be recognized as an asset if the entity expects
to recover those costs. However, those incremental costs are limited to the costs that the entity
would not have incurred if the contract had not been successfully obtained (e.g. ‘success fees’
paid to agents). A practical expedient is available, allowing the incremental costs of obtaining a
contract to be expensed if the associated amortization period would be 12 months or less.
Costs incurred to fulfil a contract are recognized as an asset if and only if all of the following criteria
are met:
i) the costs relate directly to a contract (or a specific anticipated contract);
ii) the costs generate or enhance resources of the entity that will be used in satisfying
performance obligations in the future; and
iii) the costs are expected to be recovered.
These include costs such as direct labor, direct materials, and the allocation of overheads that
relate directly to the contract.
The asset recognized in respect of the costs to obtain or fulfil a contract is amortized on a
systematic basis that is consistent with the pattern of transfer of the goods or services to which the
asset relates.
Example – Amortization of cost
An entity enters into a service contract to manage a customer’s information technology data
center for five years. The contract is renewable for subsequent one-year periods. The average
customer term is seven years. The entity pays an employee a CU10,000 sales commission upon the
customer signing the contract. Before providing the services, the entity designs and builds a
technology platform for the entity’s internal use that interfaces with the customer’s systems. That
platform is not transferred to the customer, but will be used to deliver services to the customer.
Incremental costs of obtaining a contract
The entity recognizes an asset for the CU10,000 incremental costs of obtaining the contract for
the sales commission because the entity expects to recover those costs through future fees for
the services to be provided. The entity amortizes the asset over seven years, because the asset
relates to the services transferred to the customer during the contract term of five years and the
entity anticipates that the contract will be renewed for two subsequent one-year periods.
Example-contract modification to construction plan
Company C agrees to construct a specialized cruise ship for a customer. Halfway through the
project, the customer decides to modify the original plans to accommodate additional
passengers. The change is communicated orally and written change order for the additional

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material, design services or labor has been executed. Company C has built the ship for the
customer before and the customer has been willing to pay for the incremental services and
materials, together with a margin as long as C can show that the costs are reasonable given the
changes requested.
Although there has been no formal agreement with the customer on the change in scope C may
currently be able to recognize revenue for construction type and certain production type
contracts to the extent of costs incurred plus a reasonable margin, if it is probable that the costs
will be recovered through a change in contract price. (IAS 18)
Under the new IFRS revenue cannot be recognized until C demonstrate that the contract
modifications are approve and legally enforceable.

Sales with Entities recognizes revenue at the amount to which they expect to be
return entitled, by applying the variable consideration and constraint guidance in
step 3 of the model
Entities also recognize a refund liability and asset for any products that they
expect to be returned

Warranties Warranties are accounted for as a performance obligation if: -

• the customer has an option to purchase the warranty separately; or
• additional services are provided as part of the warranty
Otherwise, warranties will continue to be accounted for under existing
standards.
The new IFRS provides some factors to help assess whether a warranty
provides the customer with an additional service, including:
• whether the warranty is required by law
• the length of the warranty coverage; and
• the nature of the tasks that the entity promises to perform

Principal If the entity obtains control of the goods or services of another party before
versus agent it transfer control to the customer, then the entity’s performance obligation is
considerations to provide the goods or services itself. Therefore, the entity is acting as
principal
The new IFRS provides a list of indicators for evaluating when an entity’s
performance obligation is not to provide the goods or services itself and the
entity is therefore, acting as an agent.

Repurchase Depending on its nature and terms, a sales contract that includes a
agreements repurchase agreement may be accounted for as a sale with a right of return,
a lease or a financing arrangement.
To determine the treatment of the repurchase agreement, entities consider:
-
• Whether the repurchase agreement is: -
• - a put option, in which customer control
• - a call option or forward in which entity control
• the likelihood of the customer exercising its put option, which will
include consideration of pricing and whether the customer has a
significant economic incentive to exercise

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 Other Application guidance is also provided on the following topics.
application • performance obligations satisfies over time;
topics • bill and hold arrangement;
• Consignment arrangements;
• customer acceptance;
• non-refundable upfront fees; and
• disaggregation of revenue disclosures

Licenses Special application guidance on assessing whether revenue from a distinct

license or intellectual property is recognized at a point in time or over time. If
the license is not distinct from other promises in the contract, then the general
model in step 5 is applied otherwise the following guidance is applied.
A right to use the intellectual property as it exists at the time the license is
granted- point in time
A right to access the intellectual property as it exists throughout the license
period- over the time
Example-License for access to intellectual property
By contrast Franchisor Y licenses the right to open a store in a specified location to a franchisee.
The store will bear franchisor Y’s name and the franchisee will have the right to sell Y’s products for
10 years. The franchisee promises to pay an up-front fixed fee.
The franchisee has licensed access to Y’s intellectual property as it exists at any point during the
license period because: -
- the franchise contract requires Y to maintain the brand through product improvements,
marketing campaigns etc;
- any action by Y may have a direct positive or negative effect on the customer; and
- these activities do not transfer a good or service to the customer
The upfront fixed fee is therefore, recognized over the term.
Example - Warranties
An entity manufactures and sells computers that include an assurance-type warranty for the first
90 days. The entity offers an optional ’extended coverage’ plan under which it will repair or
replace any defective part for three years from the expiration of the assurance-type warranty.
Since the optional ‘extended coverage’ plan is sold separately, the entity determines that the
three years of extended coverage represent a separate performance obligation (i.e., a service-
type warranty).
The total transaction price for the sale of a computer and the extended warranty is CU3,600. The
entity determines the stand-alone selling price of each is CU3,200 and CU400, respectively. The
inventory value of the computer is CU1,440. Furthermore, the entity estimates that, based on its
experience, it will incur CU200 in costs to repair defects that arise within the 90-day coverage
period for the assurance-type warranty. As a result, the entity will record the following entries:
Dr. Cash/Trade receivables 3,600
Dr. Warranty expense 200
Cr. Accrued warranty costs (assurance-type warranty) 200
Cr. Contract liability (service-type warranty) 400
Cr. Revenue 3,200
To record revenue and contract liabilities related to warranties.
Dr. Cost of goods sold 1,440
Cr. Inventory 1,440
To relieve inventory and recognize cost of goods sold.
The entity de-recognizes the accrued warranty liability associated with the assurance-type
warranty as actual warranty costs are incurred during the first 90 days after the customer receives
the computer. The entity recognizes the contract liability associated with the service-type
warranty as revenue during the contract warranty period and recognizes the costs associated

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with providing the service-type warranty as they are incurred. That is, the entity would need to be
able to determine whether the repair costs incurred are applied against the warranty reserve
already established or recognized as an expense as incurred.
Presentation in financial statements
Contracts with customers will be presented in an entity’s statement of financial position as a
contract liability, a contract asset, or a receivable, depending on the relationship between the
entity’s performance and the customer’s payment.
A contract liability is presented in the statement of financial position where a customer has paid
an amount of consideration prior to the entity performing by transferring the related good or
service to the customer.
Where the entity has performed by transferring a good or service to the customer and the
customer has not yet paid the related consideration, a contract asset or a receivable is presented
in the statement of financial position, depending on the nature of the entity’s right to
consideration. A contract asset is recognized when the entity’s right to consideration is conditional
on something other than the passage of time, for example future performance of the entity. A
receivable is recognized when the entity’s right to consideration is unconditional except for the
passage of time.
Contract assets and receivables shall be accounted for in accordance with IFRS 9. Any
impairment relating to contracts with customers should be measured, presented and disclosed in
accordance with IFRS 9. Any difference between the initial recognition of a receivable and the
corresponding amount of revenue recognized should also be presented as an expense, for
example, an impairment loss.-
Disclosures
The disclosure objective stated in IFRS 15 is for an entity to disclose sufficient information to enable
users of financial statements to understand the nature, amount, timing and uncertainty of revenue
and cash flows arising from contracts with customers. Therefore, an entity should disclose
qualitative and quantitative information about all of the following:
i) its contracts with customers;
ii) the significant judgments, and changes in the judgments, made in applying the guidance
to those contracts; and
iii) any assets recognized from the costs to obtain or fulfil a contract with a customer.
Entities will need to consider the level of detail necessary to satisfy the disclosure objective and
how much emphasis to place on each of the requirements. An entity should aggregate or
disaggregate disclosures to ensure that useful information is not obscured.
In order to achieve the disclosure objective stated above, the Standard introduces a number of
new disclosure requirements.
Effective date and transition
The standard should be applied in an entity’s IFRS financial statements for annual reporting periods
beginning on or after 1 January 2018. Earlier application is permitted. An entity that chooses to
apply IFRS 15 earlier than 1 January 2018 should disclose this fact in its relevant financial
statements.
When first applying IFRS 15, entities should apply the standard in full for the current period, including
retrospective application to all contracts that were not yet complete at the beginning of that
period. In respect of prior periods, the transition guidance allows entities an option to either:
a) apply IFRS 15 in full to prior periods (with certain limited practical expedients being
available); or
b) retain prior period figures as reported under the previous standards, recognizing the
cumulative effect of applying IFRS 15 as an adjustment to the opening balance of equity
as at the date of initial application (beginning of current reporting period).

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