IFRS 15 is effective for annual reporting periods beginning on or after 1 January 2018, with earlier application permitted.
IFRS 15 establishes the principles that an entity applies when reporting information about the nature, amount, timing and uncertainty of revenue and cash flows from a contract with a customer. Applying IFRS 15, an entity recognises revenue to depict the transfer of promised goods or services to the customer in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.
To recognise revenue under IFRS 15, an entity applies the following five steps:
- identify the contract(s) with a customer.
- identify the performance obligations in the contract. Performance obligations are promises in a contract to transfer to a customer goods or services that are distinct.
- determine the transaction price. The transaction price is the amount of consideration to which an entity expects to be entitled in exchange for transferring promised goods or services to a customer. If the consideration promised in a contract includes a variable amount, an entity must estimate the amount of consideration to which it expects to be entitled in exchange for transferring the promised goods or services to a customer.
- allocate the transaction price to each performance obligation on the basis of the relative stand-alone selling prices of each distinct good or service promised in the contract.
- recognise revenue when a performance obligation is satisfied by transferring a promised good or service to a customer (which is when the customer obtains control of that good or service). A performance obligation may be satisfied at a point in time (typically for promises to transfer goods to a customer) or over time (typically for promises to transfer services to a customer). For a performance obligation satisfied over time, an entity would select an appropriate measure of progress to determine how much revenue should be recognised as the performance obligation is satisfied.
In April 2001 the International Accounting Standards Board (Board) adopted IAS11Construction Contractsand IAS18Revenue, both of which had originally been issued by the International Accounting Standards Committee (IASC) in December 1993. IAS18 replaced a previous version:Revenue Recognition(issued in December 1982). IAS11 replaced parts of IAS11Accounting for Construction Contracts(issued in March 1979).
In December 2001 the Board issuedSIC‑31Revenue—Barter Transactions Involving Advertising Services. The Interpretation was originally developed by the Standards Interpretations Committee of the IASC to determine the circ*mstances in which a seller of advertising services can reliably measure revenue at the fair value of advertising services provided in a barter transaction.
In June 2007 the Board issued IFRIC13Customer Loyalty Programmes. The Interpretation was developed by the IFRS Interpretations Committee (the ‘Interpretations Committee’) to address the accounting by the entity that grants award credits to its customers.
In July 2008 the Board issued IFRIC15Agreements for the Construction of Real Estate. The Interpretation was developed by the Interpretations Committee to apply to the accounting for revenue and associated expenses by entities that undertake the construction of real estate directly or through subcontractors.
In January 2009 the Board issuedIFRIC18Transfers of Assets from Customers. The Interpretation was developed by the Interpretations Committee to apply to the accounting for transfers of items of property, plant and equipment by entities that receive such transfers from their customers.
In May 2014 the Board issued IFRS15Revenue from Contracts with Customers, together with the introduction of Topic 606 into the Financial Accounting Standards Board’sAccounting Standards Codification®. IFRS15 replaces IAS11, IAS18, IFRIC13, IFRIC15, IFRIC18 and SIC‑31. IFRS15 provides a comprehensive framework for recognising revenue from contracts with customers.
In September 2015 the Board issuedEffective Date of IFRS15which deferred the mandatory effective date of IFRS15 to 1January 2018.
In April 2016 the Board issuedClarifications to IFRS 15Revenue from Contracts with Customers clarifying the Board’s intentions when developing some of the requirements in IFRS15. These amendments do not change the underlying principles of IFRS15 but clarify how those principles should be applied and provide additional transitional relief.
In May 2017, the Board issued IFRS17Insurance Contractswhich permits an entity to choose whether to apply IFRS17 or IFRS15 to specified fixed-fee service contracts that meet the definition of an insurance contract.
Other Standards have made minor consequential amendments to IFRS15, including IFRS16Leases(issued January 2016) andAmendments to References to the Conceptual Framework in IFRS Standards(issued March 2018).
