IFRS 15 Revenue supplement

79 Pages·2017·1.58 MB·English

IFRS 15
Revenue
supplement
Guide to annual fnancial statements
IFRS®
October 2017
kpmg.com/ifrs
Contents
About this supplement 1
About IFRS 15 3
Part I – The retrospective method 8
Consolidated statement of fnancial position 9
Consolidated statement of proft or loss and
other comprehensive income 11
Consolidated statement of changes in equity 13
Consolidated statement of cash fows 15
1. Revenue 17
A. Signifcant accounting policy 17
B. Nature of goods and services 17
C. Disaggregation of revenue 21
D. Contract balances 23
E. Transaction price allocated to the remaining
performance obligations 25
2. Contract costs 25
3. Operating segments 27
4. Changes in accounting policies 33
Part II – The cumulative effect method 38
Consolidated statement of fnancial position 39
Consolidated statement of proft or loss and
other comprehensive income 41
Consolidated statement of changes in equity 43
Consolidated statement of cash fows 45
1. Revenue 47
A. Signifcant accounting policy 47
B. Nature of goods and services 47
C. Disaggregation of revenue 51
D. Contract balances 53
E. Transaction price allocated to the remaining
performance obligations 55
2. Contract costs 55
3. Operating segments 57
4. Changes in accounting policies 63
Appendix – Retrospective application with practical
expedients 68
Keeping in touch 74
Acknowledgements 76
About this supplement
hT is supplement has been produced by the KPMG International tS andards
Group p( art o f KPMG IFRG Limited ) to complement our Guide to annual fnancial
statements – Illustrative disclosures t( he eS ptember 2017 guide.)
hT e eS ptember 2017 guide helps you to prepare n� ancial statements in
accordance iw th IFR,S illustrating one possible of rmat of r n� ancial statements
based on a c� titious multinational listed corporation ; the corporation is not a
r� stt- ime adopter o f IFR.S
Revenue from T his supplement f ocuses on the disclosure reuq irements in IFR �S 1 5 Revenue
from Contracts with Customers, hw ic h are due to become ef f ective f or annual
contracts with periods beginning on or af ter 1� J anuary 201.8 It pro vides IFR S 1 5 disclosure
customers eax mples and e px lanations as a supplement to the eS ptember 20 17 guide ; as
such, this supplement is not intended to reconcile to that guide.
T his supplement does not illustrate all o f the disclosures speci� ed in IFR�S 1,5
hw ic h iw ll depend on an entit y’ s underlying f acts and circumstances ; f or a uf ll
list o f the potential disclosures, see our Guide to annual fnancial statements –
Disclosure checklist eS( ptember 20 17.)
Illustrative examples T he eax mple disclosures in this supplement relate to a multinational
listed corporation that is early adopting IFR S 1 .5 T he corporation provides
telecommunication services and builds satellite communication systems. T he
entity is reuq ired to present only one y ear o f comparativ e inf ormation, although
some entities may be reuq ired to present comparativ e inf ormation f or more
than one year. In addition, the disclosures are intended to epx lain the rele vant
reuq irements and theref ore may be more detailed than is necessary in some
places. Individual entities should tailor the disclosures and their order to re� ect
their specic� circumst ances, including the materiality o f the items concerned.
IFR S 1 5 of f ers a range o f transition options. T his guide illustrates:
– the retrospective method, using the practical epx edient allo iw ng non-
disclosure o f the amount o f the transaction price allocated to the remaining
perf ormance obligations, and an epx lanation o f hw en the entit y epx ects to
recognise that amount as revenue f or all reporting periods presented bef ore
the date o f initial application – i.e. 1 J anuary 2017 s( ee Part I ;)
– the cumulative effect method : i.e. recognising the cumulativ e ef f ect
o f applying IFR S 1 5 as o f 1 J anuary 2017, iw th no rest atement o f the
comparative period s( ee Part II ;) and
– disclosures hw en applying IFR S 1 5 retrospectively with the practical
expedient in paragraph C5(b) s( ee the Appendi.)x
For uf rther det ails o f the transition options, see our publication Transition to the
new revenue standard – What is the best option for your business?
Structure of this hT is supplement includes the of lloiw ng illustrative disclosures:
supplement – primary n� ancial statements;
– revenue note, including signic� ant accounting policies of r revenue recognition;
– contract costs note;
– operating segments note ; and
– changes in accounting policies note.
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Appendix Part II – oN tes Part II – Primary statements Part I – oN tes Part I – Primary statements IRTN UDO ITC NO
2 | Guide to annual fnancial statements – IFRS 15 Revenue supplement
References to standards are included in the left-hand margin of this
References
supplement. Generally, the references relate only to presentation and
disclosure requirements.
IFRS 15.123–126 Paragraphs 123 to 126 of IFRS 15.
[IFRS 15.31, Paragraphs 31, 46 to 47 of IFRS 15. The square brackets
46–47]
are used only in signifcant accounting policies to indicate
that the paragraph relates to recognition and measurement
requirements, as opposed to presentation and disclosure
requirements.
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pA pendix Part II – oN tes Part II – Primary statements Part I – oN tes Part I – Primary statements INTRODUCTION
About IFR S 1 5 | 3
About IFRS 15
IFR S 1 5 replaces eix sting guidance and introduces a ne w model of r revenue
recognition that is based on the transef r o f control. hT is may aef f ct the timing
and amount o f revenue that entities iw ll recognise under IFR S 1 5 compared
iw th current practice. For some entities, there may be little change. oH ew ver,
arriving at this conclusion iw ll reuq ire an understanding o f the ne w model and
an analysis o f ho w it is applied to particular transactions.
All entities iw ll be subej ct to the ne w disclosure reuq irements, hw ich apply
regardless o f IFR S 1s’5 impact on the revenue line.
IFR S 1 5 is eef f ctive of r annual periods beginning on or atf er 1 aJ nuary 201.8
aE rly adoption is permitted.
For uf rther details o f IFR S 1 5 and its impacts, see our publication Issues In-
Depth – Revenue from Contracts with Customers.
Disclosure requirements
IFR S 1 5 contains both uq antitative and uq alitative disclosure reuq irements
of r annual and interim periods. hT e disclosure reuq irements discussed in this
publication relate to annual periods, unless indicated otheriw se.
Under IFR S 1,5 an entity discloses more inof rmation about its contracts
iw th customers than is currently reuq ired under IA S 1 8 Revenue and IA S 11
Construction Contracts, including more disaggregated inof rmation about
revenue and more inof rmation about its perof rmance obligations remaining at
the reporting date.
IFRS 15.110 hT e obej ctive o f the disclosure reuq irements is to provide suc� f ient
inof rmation to enable users o f n� ancial statements to understand the nature,
amount, timing and uncertainty o f revenue and cash o� sw arising rf om
contracts iw th customers.
IFRS 15.113, 129 An entity is reuq ired to disclose, separately rf om other sources o f revenue,
revenue recognised rf om contracts iw th customers, and any impairment
losses recognised in accordance iw th IFR S 9 Financial Instruments o( r
IA 93 �S Financial Instruments: Recognition and Measurement i f applicable )
on receivables or contract assets arising rf om contracts iw th customers. I f
an entity elects either the practical epx edient not to aduj st the transaction
price of r a signic� ant n� ancing component or the practical epx edient not to
capitalise costs incurred to obtain a contract, then it discloses that af ct.
IFRS 15.114–128 IFR S 1 5 includes disclosure reuq irements on the disaggregation o f revenue,
contract balances, perof rmance obligations and assets recognised to obtain
or uf ll� a contract, as ew ll as signic� ant uj dgements in the application o f
thes� tandard.
nE tities iw ll need to assess hw ether their current systems and processes are
capable o f capturing, tracik ng, aggregating and reporting inof rmation to meet
the disclosure reuq irements o f the ne w standard. For many entities, this may
reuq ire signic� ant changes to eix sting datag- athering processes, I T systems
and internal controls.
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Appendix Part II – oN tes Part II – Primary statements Part I – oN tes Part I – Primary statements IRTN UDO ITC NO
4 | Guide to annual fnancial statements – IFRS 15 Revenue supplement
Disaggregation of revenue
IFRS 15.114–115, B87–B89 IFRS 15 requires the disclosure of revenue from contracts with customers
disaggregated into categories that depict how the nature, amount, timing and
uncertainty of revenue and cash fows are affected by economic factors. The
standard includes examples of such categories.
An entity also discloses the relationship between the disaggregated revenue
and the entity’s segment disclosures.
In determining these categories, an entity considers how revenue is
disaggregated, in:
– disclosures presented outside the fnancial statements – e.g. earnings
releases, annual reports or investor presentations;
– information reviewed by the chief operating decision maker for evaluating
the fnancial performance of operating segments; and
– other information similar to the above that is used by the entity or users of
the entity’s fnancial statements to evaluate performance or make resource
allocation decisions.
Geography
Type of good or
Contract duration
service
Timing of transfer Example Market or type of
of good or service categories customer
Sales channels Type of contract
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Appendix Part II – Notes Part II – Primary statements Part I – Notes Part I – Primary statements INTRODUCTION
About IFRS 15 | 5
eD tailed disclosures
This section provides an overview of the disclosure requirements under the
new revenue standard and highlights similarities with and differences from the
existing disclosure requirements.
Disclosure requirements Revenue recognised
What’s
Over At a point new?
time in time
IFRS 15.116–118 Contract balances
The opening and closing balances related to contracts
with customers (if not otherwise separately presented
or disclosed) for:
– contract assets  
– contract liabilities
– receivables from contracts with customers
The amount of revenue recognised in the current
period that was included in the opening contract
 
liability balance
The amount of revenue recognised in the current
period from performance obligations satisfed (or
partialy satisfed) in previous periods – e.g. changes in  
transaction price
An explanation of how the timing of satisfaction of the
entity’s performance obligations relates to the typical
payment terms and how these two factors wil afect  
the contract asset and contract liability balances
An explanation of the signifcant changes in
the balances of contract assets and contract
liabilities, including both qualitative and quantitative  
information – examples could include:
– changes arising from business combinations
– cumulative catch-up adjustments to revenue (and
to the corresponding contract balance) arising from
a change in the measure of progress, a change in
the estimate of the transaction price or a contract
modifcation
– impairment of a contract asset
– changes in the timeframe for a right to consideration
becoming unconditional (reclassifed to a
receivable) or for a performance obligation to be
satisfed (the recognition of revenue arising from a
contract liability)
IFRS 15.119–122 Performance obligations
When the entity typically satisfes its performance
obligations – e.g. on shipment, on delivery, as services
 
are rendered or on completion of service
Signifcant payment terms – e.g. whether the
contract has a signifcant fnancing component, the
consideration is variable and the variable consideration  
is constrained
eN w disclosure ixE sting pxE anded reuq irements
reuq ired under reuq irement Similar disclosure requirements exist under
IFR1�S 5 current standardsa; however, they are more
detailed or specifc under IFRS 15
a. For example, IAS 1 Presentation of Financial Statements, IAS 11, IAS 18, IAS 37 Provisions, Contingent Liabilities and
Contingent Assets and IFRS 8 Operating Segments.
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Appendix Part II – oN tes Part II – Primary statements Part I – oN tes Part I – Primary statements IRTN UDO ITC NO
6 | Guide to annual fnancial statements – IFRS 15 Revenue supplement
Disclosure requirements Revenue recognised
What’s
Over At a point new?
time in time
IFRS 15.119–122 Performance obligations (continued)
The nature of the goods or services that the entity has
promised to transfer, highlighting any performance
obligations to arange for another party to transfer  
goods or services (if the entity is acting as an agent)
Obligations for returns, refunds and other
similar obligations  
Types of warranties and related obligations
 
The aggregate amount of the transaction price
allocated to performance obligations that are
unsatisfed (or partially unsatisfed) at the reporting
date. A quantitative (using time bands) or a qualitative  
explanation of when the entity expects that amount to
be recognised as revenue is also required
IFRS 15.121, 129 As a practical expedient, an entity is not required to
disclose the transaction price allocated to unsatisfed
(or partially unsatisfed) performance obligations, and
when the entity expects to recognise that revenue
using quantitative or qualitative disclosures, if:
– the contract has an original expected duration of
one year or less
– the entity applies the practical expedient to
recognise revenue at the amount to which it has a
right to invoice, which corresponds directly to the
value to the customer of the entity’s performance
completed to date – e.g. a service contract in which
the entity bills a fxed hourly amount
If an entity elects to use the practical expedient,
then it discloses that fact
IFRS 15.122 The entity also discloses whether it is applying the
practical expedient and whether any consideration
from contracts with customers is not included in
the transaction price – e.g. whether the amount  
is constrained and therefore not included in
the disclosure
IFRS 15.123–126 Signifcant judgements when applying IFRS 15
An entity discloses the judgements and changes in
judgements made in applying the new standard that
affect the determination of the amount and timing of
revenue recognition – specifcally, those judgements
 
used to determine the timing of the satisfaction of
performance obligations, the transaction price, and
amounts allocated to performance obligations
New disclosure Existing Expanded requirements
required under requirement Similar disclosure requirements exist under
IFRS 15 current standardsa; however, they are more
detailed or specifc under IFRS 15
a. For example, IAS 1, IAS 11, IAS 18, IAS 37 and IFRS 8.
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Appendix Part II – Notes Part II – Primary statements Part I – Notes Part I – Primary statements INTRODUCTION
About IFRS 15 | 7
iD sclosure reuq irements Revenue recognised
hW ats’
vO er At a point ne?w
time in time
IFRS 15.123–126 iS gnic� ant uj dgements hw en applying IFR S 1 5 c( ontinued)
For performance obligations that are satisfed
over time, an entity describes the method used to

recognise revenue – for example:
– a description of the output or input method and
how those methods are applied
– why such methods are a faithful depiction of the
transfer of goods or services
For performance obligations that are satisfed at a
point in time, IFRS 15 requires a disclosure about
the signifcant judgements made to evaluate when

the customer obtains control of the promised goods
or services
An entity discloses information about the methods,
inputs and assumptions used to:
– determine the transaction price, which includes:
- estimating variable consideration
- assessing whether the variable consideration is
constrained
- adjusting the consideration for a signifcant
fnancing component
 
- measuring non-cash consideration
– allocate the transaction price, including estimating
the stand-alone selling prices of promised goods
or services and allocating discounts and variable
consideration
– measure obligations for returns and refunds, and
other similar obligations
Assets recognised rf om costs to obtain or uf ll� a contract iw th a customer
IFRS 15.127–128 An entity discloses the following items that are
recognised from the costs incurred to obtain or fulfl a
contract with a customer:
– the amount of amortisation
– any impairment losses recognised in the  
reporting period
These items are separated by their main category – e.g.
acquisition costs, pre-contract costs, set-up costs and
other fulflment costs
An entity describes the judgements made in
determining the amount of the costs incurred to
obtain or fulfl a contract with a customer and the
 
method used to determine the amortisation for each
reporting period
New disclosure Existing Expanded requirements
required under requirement Similar disclosure requirements exist under
IFRS 15 current standardsa; however, they are more
detailed or specifc under IFRS 15
a. For example, IAS 1, IAS 11, IAS 18, IAS 37 and IFRS 8.
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Appendix Part II – oN tes Part II – Primary statements Part I – oN tes Part I – Primary statements IRTN UDO ITC NO
8 | Guide to annual fnancial statements – IFRS 15 Revenue supplement
Part I – The retrospective method
Explanatory notes
IFRS 15.C3, C5, a. IFRS 15 offers a range of transition options. In Part I of this guide, the Group has initially applied IFRS 15 retrospectively,
Insights 4.2A.490 using the practical expedient allowing non-disclosure of the amount of the transaction price allocated to the remaining
performance obligations, and an explanation of when it expects to recognise that amount as revenue for all reporting
periods presented before the date of initial application – i.e. 1 January 2017.
For an illustration of the cumulative effect method, see Part II of this guide.
For an illustration of the disclosures when applying IFRS 15 retrospectively with the practical expedient in
paragraph C5(b), see the Appendix.
IFRS 15.110, b. To meet the disclosure objective in IFRS 15 and comply with the presentation and disclosure guidance in IAS 1, an
IAS 1.29–30, 55, 77 entity applies judgement in determining whether the following items should be presented separately (either in the
statement of fnancial position or in the notes) or aggregated with another line item (and if so, then which line item):
– refund liability;
– costs to obtain a contract;
– costs to fulfl a contract;
– right to recover a returned good (asset);
– liability from repurchase agreement; and
– consideration paid to the customer (asset).
IAS 1.60–64 c. An entity applies the requirements in IAS 1 in classifying an asset or a liability related to a contract with the customer
as current or non-current.
IAS 1.10(f), 40A d. The Group has presented a third statement of fnancial position as at the beginning of the preceding period, because
retrospective changes in accounting policy have a material effect on the information in the statement (see Note 4).
IAS 8.26, e. The Group has labelled the restated comparative information with the heading ‘restated’.
Insights 2.8.50.110
In our view, this is necessary to highlight to users the fact that the comparative information is not the same as the
information previously presented in the prior year’s fnancial statements.
IFRS 15.B21, BC367 f. IFRS 15 and other standards do not specify where assets for rights to recover products from customers with regard to
sale with a right of return should be presented. The Group has included the assets in ‘inventories’ and discloses them
separately in the related note (not illustrated).
IFRS 15.105, 109, A, g. Although this guide uses the term ‘contract assets’, an entity may also use other terms.
BC320
IFRS 15.105, 108, h. Any unconditional rights to consideration are presented separately as a receivable. A right to consideration is
BC322–BC326 ‘unconditional’ if only the passage of time is required before payment of that consideration is due.
IFRS 15.55 i. The Group has presented its refund liabilities as ‘trade and other payables’ under IFRS 15. The Group’s returns policy
offers only an exchange for another good or store credit – i.e. the Group does not offer a cash refund. Therefore,
refund liabilities do not meet the defnition of a fnancial liability in IAS 32. If a refund liability or a liability related to a
repurchase agreement meets the defnition of a fnancial liability in IAS 32 Financial Instruments: Presentation, then it
is subject to the disclosure requirements in IFRS 7 Financial Instruments: Disclosures.
IFRS 15.105, 109, j. Although this guide uses the term ‘contract liabilities’, an entity may also use other terms.
BC320–BC321
IFRS 15.B30 k. If a customer does not have the option to purchase a warranty separately, then an entity accounts for the warranty in
accordance with IAS 37 unless the promised warranty, or a part of the promised warranty, provides the customer with
a service in addition to the assurance that the product complies with agreed-on specifcations.
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Appendix Part II – Notes Part II – Primary statements Part I – Notes PART I – PRIMAR Y STATEMENTS Introduction