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Revenue Recognition under IFRS 15

The document outlines a 5-step model for recognizing revenue under IFRS 15 using an example of a telecom contract. The contract is between ABC Corp and Johnny where Johnny subscribes to ABC's monthly plan for 12 months and receives a free handset. The 5 steps are: 1) Identify the contract, 2) Identify performance obligations, 3) Determine transaction price, 4) Allocate price to obligations, 5) Recognize revenue. For this contract, ABC recognizes CU286 for the handset upfront and CU457 over 6 months for network services, totaling CU743 in revenue for 20X1.

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Jhon Sudiarman
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483 views4 pages

Revenue Recognition under IFRS 15

The document outlines a 5-step model for recognizing revenue under IFRS 15 using an example of a telecom contract. The contract is between ABC Corp and Johnny where Johnny subscribes to ABC's monthly plan for 12 months and receives a free handset. The 5 steps are: 1) Identify the contract, 2) Identify performance obligations, 3) Determine transaction price, 4) Allocate price to obligations, 5) Recognize revenue. For this contract, ABC recognizes CU286 for the handset upfront and CU457 over 6 months for network services, totaling CU743 in revenue for 20X1.

Uploaded by

Jhon Sudiarman
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as XLSX, PDF, TXT or read online on Scribd

[Link].

com Example 1: 5-step model IFRS 15 Revenue from Contracts with Customers

Telecom operator, ABC Corp. entered into a contract with Johnny on 1 July 20X1. In line with the contract, Johnny subscribes for ABC's monthly plan for 12 months and in retu
receives free handset from ABC Corp. Johnny will pay a monthly fee of CU 100. Johnny gets the handset immediately after contract signature.
ABC sells the same handsets for CU 300 and the same monthly plans for CU 80/month without handset.
How should ABC recognize revenues from the contract with Johnny in 20X1 under IFRS 15?

Step 1: Identify the contract with a customer

= written contract between Johnny and ABC Corp.

Step 2: Identify the performance obligations

PO #1: Network services (monthly plan)


PO #2: Handset

Step 3: Determine the transaction price

Monthly fee: 100


Months of subscription: 12
Total transaction price: 1,200

Step 4: Allocate the transaction price to the performance obligations

Stand-alone selling Allocated


Performance obligations Revenue Billing
price transaction price
Network services 960 914.29 => 76.20/month =>100 / month
[Link] Example 1: 5-step model IFRS 15 Revenue from Contracts with Customers

Handset 300 285.71 286 0


Total 1,260 1,200

Step 5: Recognize revenue when (or as) an entity satisfies a performance obligation

PO #1: Network services (monthly plan) => Over time, as monthly network services are provided
PO #2: Handset => At the point of time, when handset is delivered to Johnny

Journal entries:

Revenue from handset:

Debit Contract assets 286 => Contract asset = entity’s right to consideration in exchange for goods or services that the
Credit Revenues from sales of goods) -286 transferred to a customer when that right is conditioned on something other than the p
0 time (for example, the entity’s future performance).

Invoice - month 1:

Debit Trade receivables 100


Credit Contract assets -24 (1/12 of a contract asset)
Credit Revenues from services -76
0

Total revenue in 20X1:


Revenue from handset 286
Revenue from network services (6 months) 457
Total: 743
[Link] Example 1: 5-step model IFRS 15 Revenue from Contracts with Customers

n for 12 months and in return, Johnny


[Link] Example 1: 5-step model IFRS 15 Revenue from Contracts with Customers

or goods or services that the entity has


something other than the passage of

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