IFRS 15 Revenue from Contracts with Customers
The IASB- International Accounting Standards Board Issued IFRS 15 “Revenue from contracts” to guide accounting for revenue from contracts with customers. The new standard became effective in January 2018 financial year onwards.
The core principle of IFRS 15 is that “the revenue recognition must represent the transfer of goods (promised) or services to customers in an amount that reflects the consideration to which the company expects/ received to be entitled in exchange for those goods or services”.
The transfer of goods or services is based on the transfer of control to the customer. The transfer may occur at a point in time (when a goods/service is delivered) or over time (a service is rendered or as goods are being constructed).
The IFRS 15 “Revenue from contract with customers” eliminates different treatments in how businesses and industries handle accounting for similar transactions. This difference in the accounting and disclosures in financial reporting has made it difficult for investors and other financial statement stakeholders to compare results (benchmarking) across industries and even companies within the same Industry.
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IFRS 15 “Contract with customers” Replaces the following standards and interpretations.
- IAS 18- “Revenue”
- IAS 11 -“Construction contracts
- SIC 31 -“Barter transaction involving advertising services.”
- IFRIC 13- “Customer loyalty programs.”
- IFRIC 15 -“Agreement for the construction of the real estate.”
- IFRIC 18 -“Transaction of assets from customers
IFRS 15 Overview – 5-step Model
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