Ifrs15 Revenue

IFRS Revenue — IFRS 15 v0.1

What this file is

This is a content skill that loads on top of financial-reporting-workflow-base. It supplies the recognition, measurement, presentation, and disclosure rules for revenue from contracts with customers under IFRS. The base supplies the two-layer output contract, the journal-entry format, and the self-checks.

• Standard currency — IFRS 15 as effective for annual periods beginning on or after 1 January 2018, including Clarifications to IFRS 15 (April 2016). No subsequent amendment has displaced the five-step core. (IFRS 15)
• Scope — IFRS 15 applies to contracts with customers except: leases (IFRS 16), insurance contracts (IFRS 17), financial instruments and other contractual rights/obligations in IFRS 9 / IFRS 10 / IFRS 11 / IAS 27 / IAS 28, and certain non-monetary exchanges between entities in the same line of business to facilitate sales to customers. (IFRS 15.5)

Section 1 — Scope statement

This skill covers:

• The five-step model of IFRS 15.
• Variable consideration and the constraint; significant financing components; non-cash consideration; consideration payable to a customer.
• Principal vs. agent, licences of IP, warranties, customer options (material rights), bill-and-hold, repurchase agreements, consignment.
• Contract modifications.
• Presentation of contract assets, contract liabilities, and refund liabilities.
• Incremental costs of obtaining a contract and costs to fulfil (IFRS 15.91–104).

This skill does NOT cover: lease income (IFRS 16), interest/dividend income (IFRS 9/IAS 18-legacy superseded), insurance (IFRS 17). It defers the US GAAP treatment to us-gaap-asc606-revenue.

Section 2 — Reference layer (Layer A): the five-step model

Step 1 — Identify the contract — IFRS 15.9–16

• Contract identification criteria — A contract with a customer is in scope when all five criteria are met: 1. The parties have approved the contract and are committed to perform. 2. Each party's rights are identifiable. 3. Payment terms are identifiable. 4. The contract has commercial substance. 5. It is probable the entity will collect the consideration it is entitled to. Under IFRS, "probable" = more likely than not — a lower threshold than US GAAP's "likely." (IFRS 15.9)
• Criteria not met treatment — If criteria are not met, consideration received is recognised as a liability until the criteria are met or the 15.15 release events occur. (IFRS 15.15)
• Combine contracts — Combine contracts with the same customer (or related parties) entered into at/near the same time when negotiated as a package, consideration is interdependent, or the goods/services form a single performance obligation. (IFRS 15.17)

⚑ AUDIT FLASH POINT — collectibility threshold differs from US GAAP. The IFRS bar to have a contract is lower. A US-GAAP-trained reviewer may wrongly defer revenue. Document the "more likely than not" assessment.

Step 2 — Identify the performance obligations — IFRS 15.22–30

• Performance obligation — A performance obligation is a promise to transfer a distinct good/service or a series of distinct goods/services that are substantially the same and have the same pattern of transfer. (IFRS 15.22)
• Distinct criteria — Distinct requires both: Capable of being distinct — the customer can benefit from it on its own or with readily available resources; and Distinct within the context of the contract — separately identifiable; the entity is not providing a significant integration service, the good does not significantly customise/modify another, and it is not highly interdependent/interrelated. (IFRS 15.27; IFRS 15.29)

Step 3 — Determine the transaction price — IFRS 15.46–72

• Transaction price — Transaction price = consideration the entity expects to be entitled to, excluding amounts collected on behalf of third parties. (IFRS 15.46)
• Variable consideration — Estimate using expected value or most likely amount. (IFRS 15.50–54)
• The constraint — Include only to the extent highly probable that a significant reversal will not occur. (IFRS uses "highly probable"; US GAAP uses "probable" — wording differs, intended threshold is the same.) (IFRS 15.56–58)
• Significant financing component — Adjust for time value of money where significant. Practical expedient: ignore if ≤ 1 year between transfer and payment. (IFRS 15.60–65; IFRS 15.63)
• Non-cash consideration — Measure at fair value; if fair value cannot be reasonably estimated, measure by reference to the standalone selling price. (IFRS 15.66–69)
• Consideration payable to a customer — Reduction of transaction price unless for a distinct good/service. (IFRS 15.70–72)

⚑ AUDIT FLASH POINT — non-cash consideration measurement date. IFRS measures non-cash consideration at fair value (with a fallback to SSP) and the measurement-date approach can differ from ASC 606's "contract inception" rule. Flag for dual-reporters.

Step 4 — Allocate the transaction price — IFRS 15.73–90

• Allocation by SSP — Allocate to each PO by standalone selling price; estimate SSP where not observable (adjusted market assessment, expected cost plus margin, or residual approach with the 15.79 restrictions). Allocate discounts (15.81–83) and variable consideration (15.84–86) to specific POs where the criteria are met. (IFRS 15.76; IFRS 15.79; IFRS 15.81–83; IFRS 15.84–86)

Step 5 — Recognise revenue when/as a PO is satisfied — IFRS 15.31–45

• Recognition trigger — Recognise revenue when the entity transfers control of the good/service. (IFRS 15.31)
• Over time criteria — Over time if any one of three criteria is met: 1. The customer simultaneously receives and consumes benefits as the entity performs; or 2. Performance creates or enhances an asset the customer controls; or 3. Performance does not create an asset with alternative use and the entity has an enforceable right to payment for performance to date. (IFRS 15.35)
• Measuring progress — If over time, measure progress by output or input method; if progress cannot be reasonably measured but costs are recoverable, recognise revenue only to the extent of costs. (IFRS 15.39–45; IFRS 15.45)
• Point in time indicators — Point in time otherwise — recognise when control transfers, using indicators in 15.38 (present right to payment, legal title, physical possession, risks and rewards, acceptance). (IFRS 15.38)

Section 3 — Reference layer: high-frequency special topics

• Principal vs. agent — Principal controls the good/service before transfer → gross; agent → net (fee/commission). Same indicators as US GAAP. (IFRS 15.B34–B38)
• Licences of IP — Right to access (IP changes over the period) → over time; right to use (IP as it exists when granted) → point in time. Sales/usage-based royalty exception: recognise at the later of the subsequent sale/usage or satisfaction of the PO. (IFRS 15.B52–B63; IFRS 15.B63)
• Warranties — Assurance-type → provision under IAS 37, not a PO; service-type → separate PO. (IFRS 15.B28–B33)
• Customer options / material rights — A material right is a separate PO. (IFRS 15.B39–B43)
• Contract modifications — Separate contract if distinct goods at SSP; otherwise prospective (if remaining goods distinct) or cumulative catch-up (if not). (IFRS 15.18–21)

Section 4 — Reference layer: contract costs — IFRS 15.91–104

• Incremental costs of obtaining a contract — Recognised as an asset if expected to be recovered. Practical expedient: expense if amortisation period ≤ 1 year. (IFRS 15.91; IFRS 15.94)
• Costs to fulfil a contract — Costs to fulfil a contract (not in another standard) are capitalised if they relate directly to a contract, generate/enhance resources, and are expected to be recovered. (IFRS 15.95)
• Amortisation and impairment — Amortise consistent with transfer of goods/services; test for impairment. (IFRS 15.99–104)

Section 5 — Presentation — IFRS 15.105–109

• Contract liability — Consideration received/due before transfer of goods/services. (IFRS 15.105–109)
• Contract asset — Right to consideration for goods/services transferred, conditional on something other than the passage of time. Once unconditional → receivable (in scope of IFRS 9 for impairment). (IFRS 15.105–109)
• Refund liability — Refund liability plus an asset for the right to recover returned goods. (IFRS 15.105–109)

Section 6 — Executable layer (Layer B): the procedure

Identical procedure to the US GAAP edition (base §1, two layers), citing IFRS 15 paragraphs:

0. Confirm a contract exists — Confirm a contract exists (15.9); if collectibility (more-likely-than-not) fails, book a liability and stop.
1. List promises → POs — List promises → POs (15.22–30); document distinct analysis; flag series, material rights, warranties.
2. Build the transaction price — Build the transaction price (15.46–72): fixed + constrained variable; significant financing component; non-cash at fair value; net consideration payable.
3. Determine SSP and allocate — Determine SSP and allocate (15.73–90); show the table.
4. Timing per PO — Timing per PO (15.31–45): over time (criterion + progress measure) or point in time (control indicators).
5. Principal/agent for third-party promises — Principal/agent for third-party promises (B34–B38) → gross/net.
6. Recognise revenue; book journal entries — Recognise revenue; book journal entries (base §3) day 1 + subsequent.
7. Capitalise/amortise contract costs — Capitalise/amortise contract costs (15.91–104).
8. Classify balances — Classify balances (15.105–109).
9. Disclosure checklist + reviewer brief — Disclosure checklist (§8) + reviewer brief with every flash point.

Worked example (illustrative)

Same SaaS facts as the US GAAP edition ($24,000 subscription + $6,000 non-distinct setup, paid upfront, 24-month delivery). Single combined PO, over time under 15.35(a), straight-line.

Day 1 — driving rule: IFRS 15.106 (contract liability)
  Dr  Cash                                   30,000
      Cr  Contract liability                       30,000
  (memo: single combined PO; no revenue at inception)

Each month (×24) — driving rule: IFRS 15.35(a)
  Dr  Contract liability                       1,250
      Cr  Revenue                                    1,250
  (memo: 30,000 / 24; debits = credits ✓)

Day 1 — incremental cost to obtain — driving rule: IFRS 15.91
  Dr  Contract cost asset                      3,000
      Cr  Cash                                       3,000

Each month (×24) — amortise — driving rule: IFRS 15.99
  Dr  Amortisation expense                       125
      Cr  Contract cost asset                          125

⚑ AUDIT FLASH POINT — same combine/separate judgement as US GAAP. The distinct conclusion drives timing identically; evidence the integration analysis.

Section 7 — Divergence from US GAAP (ASC 606)

IFRS 15 vs US GAAP (ASC 606) divergence table (IFRS 15 / ASC 606 comparison)

Area	IFRS 15	US GAAP (ASC 606)
Collectibility threshold (Step 1)	"Probable" = more likely than not (lower bar)	"Probable" = likely (higher bar)
Constraint wording	"Highly probable"	"Probable" (same intended threshold)
Shipping & handling	No policy election — assess as promised service	Policy election to treat as fulfillment activity
Immaterial promised goods/services	No explicit relief; general materiality	Explicit relief to disregard (606-10-25-16A)
Non-cash consideration	Fair value, fallback to SSP; measurement-date guidance differs	Fair value at contract inception
Licensing renewals & sales-based royalties	Minor application differences	Minor application differences
Interim disclosures	IAS 34	US public-entity interim regime
Reversal of impairment of contract cost assets	Permitted (consistent with IFRS)	Prohibited (US GAAP generally bars reversal)

Run us-gaap-asc606-revenue in parallel for dual-reporters and present both answers (base §2).

Section 8 — Disclosure checklist — IFRS 15.110–129

• Disclosure checklist — - [ ] Disaggregation of revenue (114–115) - [ ] Contract balances and movements; revenue recognised from opening contract liabilities (116–118) - [ ] Performance obligations: nature, timing, significant payment terms (119) - [ ] Transaction price allocated to remaining POs (backlog) and timing (120–122) - [ ] Significant judgements: timing of satisfaction; determining/allocating transaction price (123–126) - [ ] Contract cost assets: closing balances and amortisation (127–128) - [ ] Practical expedients used (129) (IFRS 15.110–129)

Section 9 — Topic self-checks (in addition to base §7)

• All five steps applied in order; each conclusion cites its IFRS 15 paragraph
• Collectibility assessed on the more-likely-than-not basis (not US GAAP "likely")
• Distinct analysis documented per PO
• Variable consideration estimated and constrained ("highly probable"); method stated
• Significant financing component assessed (or expedient) for timing > 1 yr
• SSP allocation table shown
• Over-time vs. point-in-time tied to a 15.35 criterion or control indicator
• Principal/agent resolved → gross/net
• Contract costs capitalised/amortised per 15.91–104; impairment (and any reversal) considered
• Balances classified: contract asset vs. receivable vs. contract liability vs. refund liability
• Divergence from ASC 606 checked for dual-reporters

Section 10 — Disclaimer

Provides computational and interpretive guidance on IFRS 15 only. Not an audit and not assurance. Revenue recognition turns heavily on entity-specific facts and significant judgement. Have outputs reviewed and signed by a qualified accountant before they are reflected in financial statements relied upon by third parties.