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IFRS 15 - Revenue Recognition (5 step model (Identify the contract with…
IFRS 15 - Revenue Recognition
5 step model
Identify the contract with the customer
part of ordinary activities in exchange for consideration
excludes contracts not with customers
written, oral, implied
an agreement between 2 or more parties that creates enforceable rights and obligations
criteria:
Approved
rights of each party identified
Payment terms identified
commercial substance
Probable that entity will collect
Identify the performance obligations in the contract
the promise must be distinct
Determine the transaction price
Allocate the transaction price
Revenue is recognised as or when a performance obligation is satisfied
Supersedes all other revenue recognition standards
Applied Retrospectively
2 methods
Comparatives must be restated
Revenue is recognised when control transfers
transfer of risks and rewards
having a right to payment
the customers acceptance of the goods
Transfer of legal title
transfer of physical possession
single model for transactions performed over time or at a point in time
Core Principle:
is that an entity recognises revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration by which the entity expects to be entitled in exchange for those goods or services
Scope of IAS 15
excludes contracts not with customer
How to apply the steps