OVERALL APPROACH AND FUNDAMENTAL PRINCIPLE

Question 1

To which contracts with customers is IFRS 15 applied? Are there exceptions? (SCOPE)

Answer 1

• IFRS 15 is applied to the entire contract when there are not other IFRSs that specify how to separate and/or initially meaure one (or more) parts of the contract.
• If other IFRSs specify how to separate and/or initially measure one (or more) parts of the contract, apply the requirements of IFRS 15 to the transaction price allocated to the parts of contract that not deal with other IFRSs.

Applies to all contracts with customers, except:
- Lease contracts (refer to IFRS 16);
- Insurance contracts (refer to IFRS 4);
- Financial instruments and other contractual rights or obligations (refer to IFRS 9/IAS 39, IFRS 10, IFRS 11, IAS 27, and IAS 28);
- Non-monetary exchanges between entities in the same line of business to facilitate sales to customers or potential customers.

Question 2

What is the core principle of IFRS 15?

Answer 2

The Core Principle is to Recognise revenue to represent the transfer of 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

Question 3

What are the steps to apply the core principle?

Answer 3

Step 1. Identify the contract
Step 2.Identify separate performance obligations
Step 3. Determine transaction price
Step 4. Allocate transaction price to performance obligations
Step 5. Recognise revenue when performance obligation is satisfied

Question 4

What obligations and rights comes out from the promises of an entity in a contract with a customer?

Answer 4

• One or more obligation(s) for the entity to perform – either by delivering goods, or services, or both - to the customer (termed ‘performance obligations’), and
• A right for the entity to receive remuneration from the customer as/when it satisfies performance of the obligations under the contract.