Ifrs 15 Revenue from Contracts with Customers Covers Which Types of Revenues Quizlet
IFRS 15, the International Financial Reporting Standards 15, is a comprehensive guideline on recognizing revenue from contracts with customers. This accounting standard was issued by the International Accounting Standards Board (IASB) in May 2014 and sets out the principles for recognizing revenue when goods or services are transferred to customers.
The IFRS 15 revenue from contracts with customers guideline covers a wide range of revenue types that can be generated from customer contracts. The standard applies to all contracts with customers, including those for the sale of goods, provision of services, or a combination of both.
When it comes to revenue recognition, there are two key elements to consider: the timing of revenue recognition and the amount of revenue recognized. IFRS 15 provides a five-step model that companies must follow to recognize revenue in their financial statements.
Step 1: Identify the contract with the customer
The first step is to identify whether a contract exists with a customer. A contract is defined as an agreement between two parties that creates enforceable rights and obligations.
Step 2: Identify the performance obligations in the contract
The second step is to identify the performance obligations in the contract. Performance obligations are promises to transfer goods or services to a customer.
Step 3: Determine the transaction price
The third step is to determine the transaction price, which is the amount of consideration that a company expects to receive in exchange for transferring goods or services to a customer.
Step 4: Allocate the transaction price to the performance obligations in the contract
The fourth step is to allocate the transaction price to the performance obligations in the contract. This step involves determining the amount of revenue that should be recognized for each performance obligation.
Step 5: Recognize revenue when a performance obligation is satisfied
The fifth and final step is to recognize revenue when each performance obligation is satisfied. Revenue should be recognized when the customer obtains control of the goods or services.
The IFRS 15 revenue from contracts with customers guideline covers a range of revenue types, including:
1. Sale of goods
Revenue from the sale of goods is recognized when the risks and rewards of ownership have transferred to the customer.
2. Provision of services
Revenue from the provision of services is recognized as the service is performed, or over time if the service is ongoing.
3. Rights to use intellectual property
Revenue from the sale or licensing of intellectual property, such as patents, trademarks, or copyrights, is recognized when the customer is granted the rights to use the intellectual property.
4. Performance-based payments
Revenue from performance-based payments is recognized when the performance obligation is satisfied, regardless of whether the payment is fixed or variable.
In conclusion, IFRS 15 revenue from contracts with customers provides a comprehensive guideline for recognizing revenue from customer contracts. The standard covers a wide range of revenue types, including the sale of goods, provision of services, rights to use intellectual property, and performance-based payments. Companies should follow the five-step model provided by IFRS 15 to ensure that revenue is recognized accurately and in a timely manner.
