Q1: What is IFRS 15?
IFRS 15 is an International Financial Reporting Standard that provides guidance on accounting for revenue from contracts with customers. It establishes principles for recognizing revenue that reflect the transfer of goods or services to customers in amounts that reflect the consideration the entity expects to be entitled to in exchange for those goods or services.
Q2: When is IFRS 15 effective?
IFRS 15 became effective for annual reporting periods beginning on or after January 1, 2018.
Q3: What is the core principle of IFRS 15?
The core principle of IFRS 15 is that an entity should 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.
Q4: What are the five-step model of IFRS 15?
The five-step model of IFRS 15 includes: (1) identifying the contract with the customer, (2) identifying the performance obligations in the contract, (3) determining the transaction price, (4) allocating the transaction price to the performance obligations, and (5) recognizing revenue when (or as) the entity satisfies a performance obligation.
Q5: What is a contract under IFRS 15?
A contract under IFRS 15 is an agreement between two or more parties that creates enforceable rights and obligations. The contract can be written, verbal, or implied by the entity's customary business practices.
Q6: What are performance obligations under IFRS 15?
Performance obligations under IFRS 15 are promises to transfer goods or services to a customer. A promise to transfer a good or service is a performance obligation if it is distinct, meaning the customer can benefit from it on its own or with other resources that are readily available to the customer.
Q7: How does IFRS 15 address variable consideration?
IFRS 15 requires an entity to estimate variable consideration using either the expected value method or the most likely amount method, depending on which method is expected to better predict the amount of consideration to which the entity will be entitled.
Q8: What is the transaction price under IFRS 15?
The transaction price under IFRS 15 is the amount of consideration to which an entity expects to be entitled in exchange for transferring promised goods or services to a customer.
Q9: How does IFRS 15 address revenue recognition for long-term contracts?
IFRS 15 requires an entity to recognize revenue for long-term contracts over time if it satisfies one of two criteria: either the customer simultaneously receives and consumes the benefits of the entity's performance as the entity performs, or the entity's performance creates or enhances an asset that the customer controls as the asset is created or enhanced.
Q10: What are the disclosure requirements under IFRS 15?
The disclosure requirements under IFRS 15 include information about the entity's contracts with customers, the significant judgments and estimates used in recognizing revenue, the nature and timing of satisfaction of performance obligations, and the amount of revenue recognized in the period.
Q11: What is the impact of IFRS 15 on financial statements?
IFRS 15 has the potential to significantly impact an entity's financial statements, as it requires a more detailed and nuanced approach to recognizing revenue than previous accounting standards. Entities may need to revise their accounting policies and processes, and disclose more detailed information about their revenue streams and contracts with customers.