New revenue guidance implementation in industrial productsno. Covid 19s impact on financial reporting adjusting vs. The standard specifies how, and when, an ifrs reporter will recognise revenue. Principal vs agent, or reporting revenue gross vs net. Ifrs 15 revenue from contracts with customers was issued in may 2014. To sum it up shortly but not exhaustively, you need to look directly to the. This may result in some taxes being presented on a net basis and others on a gross basis under ifrs, with a different presentation under us gaap when the policy is elected. This revised paper considers the same practical examples as. Principal versus agent considerations ifrs 15 requires an entity to evaluate whether it is a principal or an agent on the basis of whether it controlsa promised good or service before it is transferred to the customer. Clarifications to hkfrs 15 is the equivalent of clarifications to ifrs 15 revenue from contracts with customers issued by the international accounting standards board iasb.
The impact of the new standard will vary by industry. It was adopted in 2014 and became effective in january 2018. Asu 201608 clarifies the principal versus agent implementation guidance in the following areas. Proposed changes to ifrs 15 principal versus agent. This publication discusses the amended version of the standard. This is the case especially for us gaap preparers, where, for. Iasb introduced clarifications to ifrs 15 deloitte. Clarifications to ifrs 15 revenue from contracts with customersapril 2016 amendments to the illustrative examples on ifrs 15 revenue from contracts with customers paragraphs ie45, ie47, ie50ie51, ie55ie57, ie61, ie63, ie225ie227, ie230ie232, ie237ie238, ie240ie245, ie247ie248, ie275, ie277ie280, ie286ie287. The iasb concluded that it was not necessary to amend ifrs 15 with respect to collectability or measuring noncash consideration. The standard is built around a fivestep framework, including the key step of. Pwc s accounting and financial reporting guide, revenue from contracts with customers, was updated to reflect the guidance in asu 201908, which clarifies the measurement and classification of sharebased payment awards issued to a customer.
The amendments, which are effective from 1 january 2018, clarify how companies. A principal recognises revenue and expenses in gross amounts, whereas an agent recognises only fees or commissions, even if gross cash flows go through the agent ifrs 15. Accounting for revenue principal versus agent john. Both boards have proposed the same changes to the guidance on identifying performance obligations and principal versus agent, but the fasbs changes to the licensing guidance are not expected to be the same as the amended. In return, the oil and gas entity is usually entitled to a share of the production, which. Under a typical psa, an oil and gas entity will be responsible for all of the exploration costs, as well as some or all of the development and production costs associated with the hydrocarbon interest. Have you reassessed whether you are acting as principal or agent under ifrs 15.
Ifrs 15 is an international financial reporting standard ifrs promulgated by the international accounting standards board iasb providing guidance on accounting for revenue from contracts with customers. Purpose of this document 1 1 overview 2 2 contracts partially in the scope of ifrs 15 5 3 identifying the contract 7 4 nonrefundable upfront fees 14. The fasb and iasb also amended the principal versus agent guidance. Clarifications to hkfrs 15 revenue from contracts with. Rating is available when the video has been rented. With reference to agent principal relationships, both standards are pretty clear and both state that you should not include the amounts collected on behalf of others into your revenue, because they are not increasing your equity.
Although ifrs 15 provides a list of indicatorsto determine whether the entity is a customer or an agent. Revenue from contracts with customers asc 606, global. Ifrs 15 revenue from contracts with customers guide this communication contains a general overview of this topic and is current as of february 8, 2017. Revenue from contracts with customers the standard is. As we summarized here, the iasb has issued ifrs 15, revenue from contracts with customers, effective for annual reporting periods beginning on or after january 1, 2017 nb this was subsequently amended to january 1, 2018. Current ifrs ias 18 already requires a principal vs. Clarifications to hkfrs 15 revenue from contracts with customers hkicpa standard setting department staff summary june 2016 introduction 1. The iasb also deferred the effective date of the new standard to 2018 and introduced additional practical expedients on transition. In brief a look at current financial reporting issues.
The amendments to ifrs 15 are not, in all instances, the same as those the fasb is making to the us standard asc 606. In principalagent relationship, the agent will act for and on behalf of the principal. Transaction price should be allocated to each performance obligation on a relative standalone selling price ssp basis ifrs 15. The iasbs standard ifrs 15 revenue from contracts with. It also requires such entities to provide financial statement users with more informative and relevant disclosures.
The best evidence of ssp is the observable price of a good or service when the entity sells that good or. Ifrs 15 provides explicit presentation and disclosure requirements that are more detailed than under current ifrs i. It applies to an annual reporting period beginning on, or after, 1 january 2018. Instead, the nature of a license is determined by whether the entitys activities significantly change the ip to which the customer has rights. It was the subject of a joint project with the financial accounting standards board fasb, which issues. Proposed changes to ifrs 15 principal versus agent john hughes august 23, 2015 as we discussed here, the iasb has issued its exposure draft of clarifications to ifrs 15, with comments to be received by october 28, 2015. Presentation of revenue for interline cargo transportation is likely to change. Presentation and disclosure requirements of ifrs 15. Illustrative examples ifrs 15 revenue from contracts with customers. The international accounting standards board issued clarifications to ifrs 15 revenue from contracts with customers in april 2016. Under ias 18, the revenue is defined as a gross inflow of economic benefits arising from ordinary operating activities of an entity. Both ias 18 and ifrs 15 give us a guidance that you can use for your own assessment. With reference to agentprincipal relationships, both standards are pretty clear and both state that you should not include the amounts collected on behalf of others into your revenue, because they are not increasing your equity.
Although the indicators that are used in a principalagent assessment under ifrs 15 are similar to those used under ias 18, the underlying principle has changed to that of control. Hong kong financial reporting standard 15 revenue from contracts with customers hkfrs 15 is set out in paragraphs 1129 and appendices ad. Ssp is the price at which an entity would sell a promised good or service separately to a customer. Illustrative examples ifrs 15 revenue from contracts with. Revenue from contracts with customers a guide to ifrs 15. The main difference between ifrs 15 and ias 18 pertains to the revision of the accounting criteria over time in order to provide more relevant and accurate information to the users of financial statements. In april 2016, the international accounting standards board iasb issued clarifications to ifrs 15, which contains amendments that are consistent with those in asu 201608. Iasb to propose amendments to ifrs 15 principal versus agent considerations under the new revenue standards, when a third party is involved in providing goods or services to a customer, the entity must determine whether its performance obligation is to provide the good or service itself i. It means that under new ifrs 15, telecom operator must allocate a part of the revenue from prepayment plan with free handset to the sale of handset, too. Identify the good or service to be transferred to the customer. Did you control that good or service before the transfer. The application of the principles addressed will depend upon the particular facts and circumstances of each individual case. The principal bears significant risks and rewards associated with the sale of goods or the rendering of services.
Measuring progress towards complete satisfaction of a performance obligation ie91 ie100. Asc 606 and ifrs 15, revenue from contracts with customers include a number of specific factors to consider, they are principlesbased. How ifrs 15 affects an area where issues commonly arise in practice. This is a common practice when nature of the business transactions are becoming more complex day by day. To download the guide onto an ipad, please open the pdf. Indepth a look at current financial reporting issues. Illustrative examples international financial reporting. It means that if the operator gives a handset for free with. Revenue revenue ifrs 15 handbook ifrs 15 handbook kpmg. When another party is involved in providing goods or services to a customer, the entity shall determine whether the nature of its promise is a performance obligation to provide the specified goods or services itself i. The new revenue recognition standard introduces a new model for revenue recognition, and while it may not have a broad impact on some aspects of the retail and consumer industry, certain areas will be significantly affected. Ifrs 15 revenue from contracts with customers illustrative examples ie1. Unit of account at which the principalagent determination is made applying the control principle to certain types of transactions the control principle and principalagent indicators examples unit of account at which the principalagent. Performance obligations satisfied over time ie66 ie90.
Scope ifrs 15 applies to all contracts with customers, except for those that are within the scope of other ifrss. Step two identify separate performance obligations in the contract 21 4. Accounting spotlight ifrs, global financial reporting. Revenue recognitionevaluating whether an entity is acting as a principal or as an agent. Ifrs 15 revenue from contracts with customers guide. Ifrs 15 revenue from contracts with customers youtube. Revenue from contracts with customers a guide to ifrs 15 ias plus.
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