2015-02-24 37

IFRS 15 Revenue from Contracts with Customers: short review provisions of the new standard

KFO No. 9 2014
Asadova E.V.,
Director of PwC Russia

The article was provided by the editors of the magazine "Corporate financial reporting. International Standards "within the framework of the joint project" IFRS Methodology for Companies and Experts "of the Publishing House" Methodology "and the Financial Academy" Aktiv "for experts in the field of IFRS.

All IFRS methodology, expert comments, practical developments, industry recommendations are available with an annual and semi-annual subscription to the magazine.

IFRS 15 “Revenue from Contracts with Customers” (hereinafter IFRS 15) contains a new revenue recognition model and involves a significant increase in the scope of disclosure requirements. The standard will certainly affect and in many cases significantly change the current approaches of companies to revenue recognition. The purpose of this article is to consider certain theoretical provisions of the standard and analyze how they will affect the existing approaches of companies to revenue recognition.

IFRS 15 introduces a fundamentally new concept of revenue recognition. A number of new concepts and new guidance are introduced to address some of the revenue recognition issues, for example:

• separate obligations for the performance of the contract;
• new guidance on when revenue is recognized;
• the concept of variable consideration, which is used to determine the amount of revenue recognized when the amount of revenue may change;
• new guidance on the allocation of transaction prices to individual liabilities;
• accounting for the time value of money.

REFERENCE

The new 15th IFRS is the result of many years of efforts to converge IFRS and US GAAP. Probably due to this circumstance new standard in terms of revenue, it turned out to be quite voluminous - it is about 350 pages, which is an order of magnitude more impressive than the current guidance in terms of revenue recognition.

Acting on this moment guidance on revenue recognition is provided in two standards: IAS 18 Revenue and IAS 11 Construction Contracts - and a number of clarifications: IFRIC 13 Customer Loyalty Programs, IFRIC 15 Agreements for the Construction of Real Estate Objects ”, SIC 31“ Revenue - Barter Transactions Including Advertising Services ”.

Given the large volume of work, working group on the transition to IFRS 15, which will monitor the implementation practice, determine the need to develop additional guidance, play the role of a platform for discussing complex issues of practical application of the new standard between various groups users, etc.

The standard is effective for annual periods, starting January 1, 2017 , and requires retrospective application; however, the standard provides for a number of practical exceptions. Alternatively, a simplified retrospective application approach is possible.

In accordance with the simplified approach, comparative data are revised only for contracts in force (in progress) as of January 1, 2017.

Thus, companies are given considerable time to prepare and transition to the new standard. This is primarily due to a completely different revenue recognition model, which could potentially entail the need for significant changes in existing IT solutions and business processes.

The table summarizes the main changes in the revenue recognition model from the current guidance.

The current guidance provides for different approaches to revenue recognition depending on the type of transactions (supply of goods, rendering of services, construction contracts). IFRS 15 introduces a single model for accounting and determining when revenue is recognized, regardless of the type of transaction. This model should be applied for each individual performance obligation under a contract.

The determination of when revenue is recognized in accordance with the guidance of IAS 18 is based on the transfer of risks and rewards criterion. The new standard introduces the concept of transfer of control. The standard states that professional judgment is required to determine when control is transferred, and one of the indicators of the transfer of control is the transfer of risks and rewards. At the same time, there are other indicators that need to be considered to resolve the issue of the moment of transfer of control: the right to payment, the right to physical use, the fact of acceptance of the goods / services by the client. In general, the concept of control is broader, and in theory, when the new guidance is applied to a number of transactions, the timing of revenue recognition may be different from that of the current guidance.

Another distinguishing feature of the new standard is the large number of detailed guides on specific issues, for example: how to distinguish individual performance obligations; how to allocate the transaction price between individual performance obligations; what to do when the amount of remuneration may change (approach to the so-called variable consideration); how to account for proceeds from the transfer of licenses, etc.

Scope of IFRS 15

The new revenue standard applies to all contracts with customers. In doing so, the standard provides guidance on what constitutes a contract and introduces a definition of a customer.

It establishes a closed list of operations that are outside the scope of the new standard, namely:

• rent;
• insurance;
• financial instruments;
• financial guarantees;
• exchange of a homogeneous product between companies of the same industry in order to simplify the logistics of selling to customers.

In practice, difficult cases are possible when the same agreement has elements that fall under the new revenue standard and elements that should be regulated by the requirements of other standards.

New model

The new revenue recognition model under IFRS 15 is a mandatory five steps:

Step 1. Determination of the relevant contract with the client

Step 2. Determination of individual obligations for the performance of the contract

Step 3. Determining the price of the operation

Step 4. Transaction price distribution

Step 5. Revenue recognition when a performance obligation is fulfilled (or as it is fulfilled)

Step 1. Determination of the contract with the client

The new standard introduces the concept of a customer.

Client is a party who receives goods or services that are a result of the ordinary activities of a company.

Let's look at an example.

Example 1

A pharmaceutical company has entered into an agreement with a biotech company to jointly develop a new drug. As part of the application of the new standard, the question arises as to what the essence of the transaction is:

1. that a biotechnology company sells a substance and provides R&D services, or
2. that the parties have entered into a cooperation agreement under which they share the risks of developing a new drug?

The second type of agreement is outside the scope of the new revenue standard, as the parties to the agreement are not the supplier and the customer, but the cooperating parties. On the contrary, in the first variant pharmaceutical company is a customer of a biotech company, therefore the contract must be accounted for in accordance with IFRS 15.

Consolidation of contracts

At this stage, it is also necessary to determine whether it is necessary to combine several contracts into one. It is important to consider the following factors:

• contracts are negotiated within the entire package in order to achieve a single commercial goal;
• the price is interrelated, i.e. the remuneration under one contract depends on the price or the result under another contract;
• goods, works and services under different contracts constitute a single performance obligation.

Changing the terms of contracts

In practice, it is not uncommon for agreements to change: new services are added, volumes and prices change. In this regard, the question arises as to whether it is necessary to treat the amendment to the contract as a new contract and reflect the revenue on it separately or as a continuation of the old contract (in this case, it is possible to recalculate the revenue and immediately recognize the results of the change as an adjustment catch-up adjustment). Changes to the terms of the contract are subject to consideration as a new separate contract if both conditions are met:

• the volume of goods / services under the contract is increasing;
• additional remuneration under the agreement reflects the separate sales price of the additional volume of goods / services adjusted for the specific agreement.

Step 2. Determination of individual performance obligations (or individual components in accordance with current guidance)

Often, a single contract can contain several components (for example, sales of goods with installation or maintenance services).

In doing so, it is necessary to determine whether the various elements of the contract are separate performance obligations. The importance of this decision is also due to the fact that different timing of revenue recognition can be determined for different performance obligations.

A separate obligation to perform the contract is allocated in cases where the product / service:

• provides benefits to the client alone or in conjunction with other resources available to the client, and
• does not depend on other elements (goods / services) under the contract and is not interconnected with them - in other words, it is a separately identifiable product / service.

A number of substantially similar goods or services can also be considered as a separate performance obligation if there is a consistent, systematic procedure for communicating results to the client, for example: daily cleaning of the premises, call center services.

To determine whether a product / service is separately identifiable, the standard uses indicators, for example, it is necessary to establish whether integration services.

It should be noted that in many cases professional judgment is required to resolve this issue.

Example 2

The company is building a compressor station. In this case, the contract describes certain types works that involve the development of the necessary technical characteristics and parameters, delivery of individual units of equipment, assembly. The key question here is the following: does the company provide services for the integration of individual parts in order to deliver the facility on a turnkey basis? If so, this is one commitment.

Another indicator is customization level ... If the company is implementing a customized software that requires a license to use, the sale of the license is unlikely to be a separate performance obligation.

And finally, how interconnected are the elements, can they be bought separately? For example, a guarantee: if it can be bought separately, then we most likely have a separate obligation.

When within existing treaty the client is given the right to purchase additional goods, works, services (for example, within the framework of loyalty programs), then a separate obligation to perform the contract arises only if the buyer receives a substantive right that he would not have received in another situation (that is, without primary transaction for the purchase of goods / services).

Step 3. Determining the price of the operation

The transaction price is how much the company will receive as a result of the transaction in exchange for the work and services provided. One of the key decisions in determining the price of a transaction is to determine the amount of variable consideration.

There are many cases where the amount of compensation may vary, for example:

• discounts;
• fines;
• bonuses, incentives;
• performance bonuses;
• other.

To determine the amount of variable consideration, the most probable cost, or the estimated cost using expectations, is used, whichever is more applicable in a particular case.

For variable consideration, the standard is conservative: the amount of variable consideration should be recognized as revenue in an amount for which it is highly probable that it will not need to be reversed in subsequent periods. At the same time, the standard describes a number of factors that can adversely affect the assessment of the likelihood of receiving variable remuneration, for example: the presence of uncertainty during long period, limited experience with similar contracts, exposure to uncontrollable factors, wide range of prices and results.

Example 3

When it comes to discounts on a new product line in a new market, which involves limited experience and a wide range of results, you need to determine minimum amount that will be safe to recognize and will not have to be reversed in the future.

Therefore, it should be recognized "Minimum amount" revenue with a high degree of probability that it will not lead to a reversal, and spend reassessment amounts at the end of each reporting period.

Note that in many cases professional judgment is required to resolve this issue.

Example 4

The company sells equipment for 100 million conventional units (cu) with a bonus of up to 5% depending on the achievement of future performance targets. The bonus is taken into account if it exists high probability that there will be no significant reversal in relation to the bonus amount.

On initial recognition, there is evidence that it is highly probable that the bonus will be at least 3%. The transaction price is $ 103 million. That is, that amount is recognized as revenue when control is transferred.

On revaluation at the balance sheet date, it is highly probable that the bonus will be received in full. The price of the deal is $ 105 million. e. At the reporting date, additional CU2 million is recognized. e. revenue, even though some uncertainty persists.

An exception! By general rule variable consideration is recognized in an amount that is unlikely to need to be reversed. However, there is an exception - for intellectual property licenses.

For intellectual property licenses for which royalties are based on sales or use, revenue is recognized only when the sale or use occurs. Thus, the “high likelihood” limitation does not apply for intellectual property licenses. It should be noted that this exemption is not intended to be applied by analogy.

Example 5

Film screening rights. Impression royalties will only be recognized when revenue is generated from end users (viewers) from ticket sales.

The next component that can affect the amount of remuneration is the financial component. Revenue should be adjusted if there is a material financial component.

It should be noted that in many cases professional judgment is required to resolve this issue.

Note! IAS 18 also assumes that the effect of discounting is taken into account in revenue recognition if the deferred payment implies a significant financial component. However, the effect of discounting was not taken into account in situations where the company received an advance payment.

Under IFRS 15, revenue is subject to adjustment for the effect of discounting and if an advance payment is received (provided that there is a material financial component). In this case, the total revenue recognized in respect of the performance obligation under the guidance of the new standard may be higher than the transaction consideration because the this financial component.

Step 4. Distribution of the transaction price

The distribution of the transaction price between individual obligations for the performance of the contract must be performed according to the following algorithm:

1. Define a separate selling price:
   • actual or calculated;
   • The “residual” method if the selling price is very uncertain or variable (change from current practice). The residual method involves not proportionally allocating the transaction price to the individual components, but rather determining the fair value of one component (for example, the fair value of loyalty points) and allocating the difference between the transaction price and the fair value of the above component to the remaining component.
2. Distribute the transaction price based on the relative individual selling prices, as if the products were sold separately. However, if there are compelling reasons, the amount of the contract discount (the difference between the transaction price and the sum of the individual selling prices for the individual components) can be attributed to a specific performance obligation.

Step 5. Revenue recognition

The key question at this stage is: when does the transfer of control take place - simultaneously or over a period? When should revenue be recognized?

In accordance with the new guidance, it is first necessary to analyze whether revenue is to be recognized over the period (in fact, this is an analogue of the revenue recognition model by percentage of completion in the terminology of the current management). There are three clear criteria for this. If none of these are met, revenue is recognized immediately when control is transferred.

REFERENCE

Three criteria for recognizing revenue during a period:

• the client receives benefits as the activity progresses, for example, from the provision of transportation services, cleaning;
• the activity creates or improves an asset controlled by the client, for example: in the case of the construction of a building or structure on the client's land plot, the right to an unfinished building almost always remains with the client (unless under the terms of the contract, if the contract is not completed, this structure cannot be dismantled and the right to it does not pass to the contractor);
• an asset is created for which there is no possibility of alternative use (that is, only the customer can use it) and the company has the right to receive payment for the work performed at any time (and not only the right to reimbursement of the actual costs incurred).

Chart 1 provides an algorithm for determining when revenue is recognized in accordance with IFRS 15.

Figure 1: Separate guidance for the recognition of license revenue

The new standard has a separate guidance for reflecting revenue from licenses: franchises, software rights, films, patents, etc.

If the license is a separate performance obligation, then it must be determined whether the license gives the holder a right of use or a right of access.

The right to use is taken into account at once. Access right - during the period. The granting license assumes that:

1. the object of the license - intellectual property - changes over time due to the actions of the company that provides the license;
2. the client is exposed to risks associated with the consequences of the activities of the licensor company;
3. the licensing company is not a separate product or service.

Example 6

Granting the right to use the logo of a sports team during the period is an access right, as the intellectual property changes: the sports team plays and gains popularity.

In contrast, the right to use an existing music library is rather a right to use.

Impact of IFRS 15 on an organization's business processes

The impact of the new standard on the organization's business processes is shown in Figure 2.

Diagram 2. Impact of the new standard on the business processes of the organization

The impact of the standard in different industries depends on existing business models and will at least be expressed in the following:

• influence on information disclosure;
• the need for training and education of personnel;
• the need to analyze all contracts or major types of contracts;
• assessment of revenue collection, time value of money and other factors.

The expected impact of the standard on companies in various industries is presented in the table:

Impact of IFRS 15 on companies in various industries

Key Considerations to Consider When Applying IFRS 15

In preparing for the application of the new revenue standard, attention should be paid to the following aspects:

P.S. You can see the full record

With the introduction of IFRS 15, the accounting for long-term contracts has changed. The most significant changes are in the definition of which contracts should be revenue recognized as work is performed. This is described in detail in the previous article. This article will discuss how to calculate revenue from such contracts in accordance with the new standard (two examples). In this case, IFRS 15 requires revenue for the reporting period to be recognized at an amount that reflects progress in meeting the performance obligation. Use or to measure this progress.

It will be a little boring theory at first, but it is necessary. Those who want to immediately delve into the practice can follow the link to at the end of the article.

Basics of IFRS 15 "Revenue from Contracts with Customers"

The new IFRS 15 introduces the concept of "performance obligation" (perfomance obligation). The word "obligation" can be translated as "obligation" and "obligation". The official translation into Russian uses the term “obligation to perform”. I will use both translations.

Obligation to perform Is a distinct product or service (or set of goods and services) that the selling company promises to deliver to the buyer.

A performance obligation is the unit of account for revenue recognition. This term was implied in the old revenue standard, but there was no precise definition.

The term “distinguishable goods” means that a good can be distinguished from other goods: the seller supplies it separately, and the buyer can use it (= benefit) separately from other goods of the seller. The same applies to services.

The selling company recognizes revenue if and when it satisfies the performance obligation. It can happen or at a certain point in time, or as the company performs work under the contract. In the second case, the seller recognizes revenue gradually over time using a suitable method to measure the degree of fulfillment of the contractual obligation. This will be discussed in this article.

The recognition of revenue over time (in different reporting periods) does not depend on the length of the contract, as it was before when IFRS 11. Now certain must be met. If they are not met, then all contract revenue is recognized when the obligation under the contract has been fully fulfilled.

If the criteria are met, then revenue is recognized depending on the progress towards complete satisfaction of that performance obligation. That is, the revenue for the reporting period is multiplied by the percentage of fulfillment of the obligation under the contract. The question is how to calculate this percentage.

Methods for measuring progress

IFRS 15 provides two methods for measuring progress in meeting a contractual obligation:

• output method
• resource method (input method)

It is these terms that are used when translating the standard into Russian. Better terms are “method of work done” and “method of cost incurred”. Later in this article, both names will be used.

Results method recognizes revenue based on direct measurement of the results of work performed at the reporting date. Possible ways listed in the standard in clause B15:

To be honest, I don't understand the practical difference between surveys and appraisals. Interestingly, in the old IAS 11 Work Contracts, paragraph 30 (b), the name of the method “surveys of work performed” was translated into Russian as “ expert review executed works".

The standard drafters point out that the method chosen should reflect as best as possible the extent to which the contractor has fulfilled its contractual obligations. If some results are not included in the calculation, then the amount of revenue will be underestimated. For example, a method based on counting units produced or delivered does not take work in progress into account. In the event that the work in progress is significant, these methods will lead to a distortion of the results of work performed and an underestimation of revenue, since the calculation will not take into account revenue from work in progress, which is controlled by the client.

In some cases, for simplicity, the contractor may recognize revenue in the amount for which he was entitled to invoice (has a right to invoice). This is possible if there is a direct relationship between the value of the results for the buyer and the amount of compensation to which the seller is entitled. For example, if in the contract for the provision of services, the seller issues an invoice for each hour of his work.

Only this method was specified in the original draft version. This is not surprising, since there is a direct logical connection between the results of activities and the revenue due. The main disadvantage of this method is the complexity and cost of obtaining information. Therefore, after the initial discussion of the draft version of the standard, a second method was added, which was widely used in the past when IAS 11 was in force. This is the cost method or the resource method.

Resource method provides for the recognition of revenue based on the efforts made by the seller to fulfill the obligation under the contract, or the resources consumed for this. That is, we take the costs incurred and see what percentage they represent from the total expected costs of the contract. It remains to determine in what units to measure the costs incurred: in hours, in money, in the amount of materials or other resources. In the standard, the options are listed in clause B18:

English in standard	Official translation
resources consumed	consumed resources
labor hours expended	spent working time
costs incurred	costs incurred
time elapsed	elapsed time
machine hours used	used machine time

Here, too, something is not clear. How does the “elapsed time” in the resource method differ from the “elapsed time” in the results method? In the method of incurred costs, the time spent on the work of personnel or equipment is allocated separately. What, then, is meant by the expression "elapsed time"?

Elapsed time in the results method is also not a very clear term. Since leases are outside the scope of IFRS 15, the timing of the rental or lease of the asset is not appropriate here. I think this is how you can measure the results of service contracts, the responsibilities of which are measured in terms of time. Say, 100 hours of consulting services or an annual subscription to a fitness club or sports event.

The resource method is less costly to use, since it is much easier to estimate the amount of resources expended than the amount of results obtained. This is its advantage. The disadvantage is that there may not be a direct relationship between costs and results. Indeed, costs and revenues are not always directly correlated with each other. This is especially obvious in the event that there are ineffective costs, defects in work, losses. In this case, the costs will be incurred, but they will not lead to the fulfillment of the obligation under the contract.

To recognize revenue, it is necessary to estimate the volume of assets (goods and services), control over which was transferred to the customer during the reporting period. And if there is no direct relationship, then the use of the method of incurred costs may lead to a distortion of the amount of contract revenue for the reporting period.

Therefore, when applying the method of resources (method of incurred costs), the contractor company must exclude the impact on the estimate of revenue of those consumed resources that did not affect the results of operations. Therefore, if the company chooses the cost method, then it must adjust the calculation of the% from which the revenue will be calculated:

• 1) in case of loss of materials, labor and other resources (inefficiency, marriage)
• 2) if the costs are not proportional to the results

In these cases, such costs are simply not included in the calculations. But in the second case, if certain conditions are met, revenue can be recognized in the amount of the costs incurred (see example 1 below). These conditions are listed in paragraph B19 (b):

If at the time of the conclusion of the contract, the fulfillment of all the conditions below is expected:

• (i) the goods are not distinguishable *;
• (ii) the buyer is expected to gain control of the goods significantly prior to receiving services related to the goods;
• (iii) the actual cost of the transferred good is significant relative to the total expected cost of meeting the full performance obligation; and
• (iv) the company purchases the product from a third party and does not significantly participate in the design and manufacture of the product (but it acts as a principal, not an agent, i.e. it controls the promised product or service before it is transferred to the customer).

* the term “distinguishable” means that a product can be separated from other products: the seller supplies it separately, and the buyer can use it (= benefit) separately from other products of the seller.

Important note. The Basis for Conclusions to the standard states that having two methods does not mean that a company has “free choice”. The contractor should select the measurement method that best represents the performance of the company in the performance of the contractual obligation. To do this, the company must analyze the nature of its activities, what is the created asset or the service provided, and make the most appropriate choice of method based on this analysis. (BC 159). For those in the know English language I will give this point in English:

BC 159 Accordingly, an entity should use judgment when selecting an appropriate method of measuring towards complete satisfaction of a performance progress obligation. That does not mean that an entity has a ‘free choice’. The requirements state that an entity should select a method of measuring progress that is consistent with the clearly stated objective of depicting the entity’s performance-that is, the satisfaction of an entity’s performance obligation-in transferring control of goods or services to the customer.

The company must apply the chosen method for the specific performance obligation consistently throughout the contract. This same method should be applied for all contracts with similar performance obligations.

Examples of revenue recognition over time

The first example is taken from the illustrative examples for IFRS 15, the second from the P2 exam of the main ACCA course.

Example 1. Illustrative example for IFRS IFRS 15.

In November 2012, Omega entered into a contract with a client for the renovation and refurbishment of a three-story building, including the installation of new elevators. Omega purchases elevators from an elevator manufacturer and installs them as they are (no rework) in the client's building. The contract price is $ 5 million. The expected cost of the work is 4 million, of which 1.5 million is the cost of the elevators.

Contract price - 5,000,000 (expected revenue from the contract)

Elevators - 1,500,000
Other costs - 2,500,000
Total expected contract costs - 4,000,000

At 31 December 2012, Omega incurred costs in the amount of 500,000 excluding the cost of the elevators. The elevators were delivered to the building in early December 2012, but they are not expected to be installed until June 2013 at the earliest. Omega uses the resource method (the ratio of costs incurred to total contract costs) to estimate intermediate results for similar projects.

Solution

1) Omega has one commitment - home remodeling

2) This performance obligation is fulfilled over time as

• a) the buyer simultaneously receives and consumes the benefits from the promised asset (work is carried out at the buyer's site)
• b) the asset created by Omega has no alternative use for it (cannot be sold to another buyer) and Omega is entitled to payment under the contract.

3) Omega acts as a principal in the elevators as it gains control of them before transferring them to the customer.

4) Control of the elevators passed to the buyer as they were delivered to the site in December 2012. The cost of the elevators is significant relative to all project costs. However, Omega has nothing to do with elevator manufacturing, so the purchase cost of the elevators ($ 1.5 million) does not reflect the extent to which Omega has fulfilled the performance obligation. Thus, 1.5 million should be excluded from the percentage of fulfillment of the contractual obligation.

5) Omega recognizes revenue from the transfer of elevators in an amount equal to their purchase value (with zero profit).

6) Calculations
Degree of fulfillment of obligations under the contract: 500,000 / 2,500,000 = 20%
Revenue (no elevators): 20% x (5,000,000 - 1,500,000) = 700,000
Elevator handover revenue: 1,500,000

OSD for the year ended 31.12.12

Revenue: 1,500,000 + 700,000 = 2,200,000
Cost: 1,500,000 + 500,000 = 2,000,000
Profit for the project: 200,000

This example illustrates the accounting treatment for material resources that were not installed in the process (uninstalled materials). If the client obtains control over the asset (goods) before it is installed / assembled by the contractor, then it would be inappropriate to recognize such goods as inventory on the contractor's balance sheet. Instead, the contractor must recognize revenue for the goods transferred in accordance with the core principle of IFRS 15. But recognizing all profits on these goods before they are installed could overstate revenue. And the recognition of profit (margin) on these goods, which differs from the indicator of profitability (margin) as a whole under the contract can be a difficult exercise.

Therefore, the drafters of the standard decided that in certain circumstances, an entity should recognize revenue from the transfer of goods, but only on the basis of the costs incurred. In this case, the value of these costs should be excluded from the calculations by the resource method.

The second task was on the P2 Corporate Reporting exam of the main ACCA program. As a rule, the tasks on this exam test the knowledge of several provisions of international standards at once. In this case, the P2 examiner tested knowledge of IFRS 15 in terms of revenue recognition over time, variable consideration and contract modification. This topic (revenue over time) has not yet been tested for the Dipifr exam through December 2016.

On December 1, 2014, Delta entered into a contract for the construction of printing equipment at the client's site. The contract value is $ 1,500,000 plus a $ 100,000 bonus if the equipment is built in 24 months. At the time of inception of the contract, Delta correctly chose to account for the manufacture of the equipment as the only performance obligation in accordance with IFRS 15. The contract costs are expected to be $ 800,000. Since the manufacture of printing equipment is sensitive to external factors(due to the supply of many components by third parties), there is a high probability that the equipment will not be manufactured in 24 months and Delta will not be eligible for the bonus.

As of November 30, 2015, Delta has incurred contract execution costs in the amount of $ 520,000. As of this date, Delta management still believes that it is unlikely that the conditions will be met to receive the bonus. However, on December 4, 2015, the contract was changed. As a result, fixed consideration and expected contract costs increased by $ 110,000 and $ 60,000, respectively. The time required to receive the bonus has also been increased by 6 months. As a result, Delta management now believes that the conditions for receiving the bonus are likely to be met. The contract still has a single performance obligation.

How should this contract be reflected in Delta's accounts as of November 30, 2015 and December 4, 2015?

Solution.

The condition explicitly states that the only performance obligation is the manufacture of printing equipment.

The bonus in the amount of $ 100,000 is not included in the remuneration under the agreement, since at the time of its conclusion there is no certainty that this bonus will not have to be canceled in the future.

• Expected revenue: $ 1,500,000
• Expected Cost: $ 800,000

The percentage of fulfillment of a contract obligation can be calculated using the cost incurred method:

520,000/800,000 = 65%

• Revenue - $ 975,000 (1,500,000 x 65%)
• Costs - $ 520,000 (all costs incurred)

Since the contract was amended on December 4, 2015, contract fees and expected costs have increased. In addition, the eligible time for receiving the bonus was extended by six months, with the result that Delta's management concluded that the inclusion of the bonus in the contract price would not reverse this amount in the future. Consequently, the $ 100,000 premium can be included in the transaction price.

Delta management also concluded that printing equipment manufacturing remains the only performance obligation. Therefore, a change to a contract in accordance with IFRS 15 must be accounted for as part of the original contract. There is a separate article.

After the modification of the contract:

• The expected revenue under the contract is 1,710,000 (1,500,000 + 110,000 + 100,000 bonus)
• Expected contract costs 860,000 (800,000 + 60,000)

Since the change in the contract took place after the reporting date, this will not affect the reporting as of November 30, 2015 (non-adjusting event).

But on December 4, 2015, additional revenue of $ 59,550 must be recorded.

• new percentage of fulfillment of the obligation: 520,000 / 860,000 = 60.5%
• revenue under the contract as of December 4, 2015: 1,710,000 x 60.5% = 1,034,550
• adjustment less previously recognized revenue: 1,034,500 - 975,000 = 59,550

Difference between IFRS IFRS 15 and IFRS 11

The old standard IAS 11, Construction Contracts, prescribed long-term contracts to be accounted for by percentage of completion: to be recognized in the income statement, the total expected revenue and expenses of the contract were multiplied by the percentage of completion at the reporting date. The balance sheet reflected the amounts for settlements with customers, calculated according to the formula prescribed in the standard.

IFRS 11 proposed such methods for assessing the stage of completion of work under a contract.

• (a) comparing the contract costs incurred to complete the work to date to the total contract costs;
• (b) expert assessment of the work performed; or
• (c) an estimate of the proportion of work performed under the contract in kind.

Mathematically, the new IFRS 15 uses the same methods as before. However, the calculated percentage is applied only to the revenue, and the cost is recognized at the cost incurred. The difference in figures will appear when using the results method, as the costs incurred may not be directly correlated with the progress in meeting the contractual obligation.

In general, the approaches to accounting for long-term contracts in the old IFRS 11 and in the new IFRS 15 differ markedly. Therefore, those who have been studying international standards for a long time and know IFRS 11 should carefully read the provisions of the new revenue standard, and not rely on old knowledge.

When there is a conversation about evaluation financial condition of the company or its economic productivity, the first indicators that come to mind of any person more or less involved in the topic are revenue and profit.

Some domestic economists are accustomed to focusing only on actual corporate profits, not taking into account such an important indicator as operating revenue. But it is he who reflects the actual value and the prospective forecast potential of the company in terms of generating cash flows that can be disposed of in the course of its activities. We will talk about what includes and what functions the IFRS 15 standard “revenue from contracts with customers” does in today's article.

General information on the standard. Objectives and Key Concepts of IPSAS 15

When an external investor, a new lender, a potential strategic partner, or even the owner himself evaluate a company in terms of its financial condition, first of all, they see how much money this company generates. This is natural, since no other indicator worries a person who wants to receive money from the company on a regular basis, as much as profit.

The total money supply of a company is usually considered according to the criteria of components and total cash, by comparing the data for the current period with historical information and indicators of competitors to see what the situation has actually developed in the business at the moment and what is its mid-term forecast.

IFRS 15 Revenue from Contracts with Customers has been developed and implemented to enable companies to reliably and accurately recognize their revenue based on various practical business circumstances, showing their external interests an objective picture of the entire cash flow. In essence, the standard is a practical guide for companies from different sectors of the economy, using which, they ensure the ubiquitous identity in the work of financers with reporting on revenue. By doing this, they increase the general literacy of the market in matters of financial accounting and solve a substantive problem - they present statements of different companies in one form, in one language and in one form.

The new revenue standard IFRS 15 is designed so that companies doing business in different sectors of the economy have the same ability to manage revenue data. The basic principle of the standard is the provision that the company records its revenue as a result of the transfer of goods or services to the buyer in exchange for remuneration in the amount reached by the parties in the negotiation process. That is, planning data cannot be recognized as revenue, since this will be considered a contractual asset, but it is mandatory to recognize receivables or actual cash receipts to the company's settlement accounts as revenue if the goods were actually transferred to the ownership of the buyer. In fact, the appearance of proceeds is due to the fact that one party performs the process of transferring goods to the other party and the corresponding acceptance of such goods and the transfer of ownership from one party to the other.

Revenue in the methodology of IFRS 15 is any incoming cash income that, for some economic reason, arose in the course of the ordinary activities of the organization. The guidance on the application of IFRS 15 does not provide guidance on deciphering the meaning of the term “ordinary activities”, therefore it is customary to mean in this matter any economic activity of the organization, thanks to which the company “makes money”. According to the standard, any counterparty with whom the company has an agreement (this is a prerequisite for the transaction) for the transfer of some goods and services in exchange for a fee can be recognized as a buyer of goods according to the standard. Suppose a barter transaction is not included in this standard and refers to a different order of reflection in financial statements exactly the same as cooperation with a buyer under IFRS 15 is not such cooperation, which provides for joint participation of the parties in a project for the development of an asset in accordance with a cooperation agreement.

As noted, in the process of economic interaction with its customers, the seller has a so-called "performance obligation" or a contractual obligation. Under this obligation, the seller must transfer goods and services to his customer, and in return receive payment, which, when the obligation is fulfilled, is transformed into revenue in the form of a cash flow or, at least, a receivable.

At the same time, at the time the obligation to transfer the goods arises (in fact, at the time of the conclusion of the transaction between the parties in the form in which they entered into it), the amount of future proceeds from this transaction, which is called the "Hotel sale price", is also agreed. Based on this logic, it becomes clear that the transaction price determines the amount of future revenue (all other things being equal), and at the organizational level is regulated by all kinds of price regulations - tariffs, price lists, discount policies, and others. This component allows companies to forecast their work and plan the size and frequency of cash flows.

In the context of IFRS 15 Revenue from Contracts with Customers, the issue of contractual relationships is critical. The IFRS 15 standard does not impose special requirements on the specific forms or procedure for concluding contracts, allowing the conclusion of contracts in any form between the parties, depending on the legal context of the transaction. In fact, the need for an agreement between the parties in any form is due to the subsequent obligation to transfer material values ​​/ services and to pay for them. That is, in this form, the existence of a contract with agreed terms is the main one for the subsequent generation of revenue. An entity shall use this revenue recognition standard for any contracts that fall within its scope. economic activity, except for those falling under other standards:

• Do not use the standard for leases, as there is a specific standard for them IAS 17.
• Do not use IFRS 15 for insurance contracts as they are subject to IFRS 4.
• Exclude all obligations and rights acquired by the company that fall within the scope of other IFRS standards in the field of investments and their return, in the field of financial instruments and joint non-monetary activities.

According to the terms of IFRS 15 IFRS, in order for an organization to recognize its revenue and reflect its amount in the relevant financial statements, it is necessary to comply with certain stages of actions, which are approved in the framework of the standard for recognizing revenue from contracts with customers.

• Carry out the procedure for complete identification of the contract.
• Carry out a procedure for identifying and classifying the obligations arising from the parties under the contract.
• Determine the fair agreed price of the transaction, which was negotiated by the parties.
• Segment the price of the transaction according to the obligations that the parties have accepted for execution within the framework of cooperation.
• Recognize actual revenue, after all possible production adjustments, when the obligations are fulfilled in full, or as each item of the obligations assumed by the selling party is fulfilled.

Drawing. Revenue recognition procedure under IFRS 15.

This consistency forces the management and financial specialists of the company to act in the area of ​​revenue recognition in accordance with the criteria of good faith and consistency. The appropriateness of revenue recognition is a very important aspect for external users of financial statements, and the procedure laid down in IFRS 15 ensures that this criterion is met.

Let's consider each of these stages separately:

1.Identification of contracts... the main task financial management consists in the fact that contracts fall under IFRS 15, and therefore have certain characteristics. The financial manager must identify the contracts according to common sense, not splitting, for example, package agreements into many separate sources of revenue, but on the contrary, summing them up. But any commercial contract with a client must have certain characteristics to be subject to IFRS 15:

• The contract in any form is approved and accepted by the parties without reservations outside the framework of the contract;
• Under the contract, the rights and obligations for the goods / services of each of the parties are clearly understood, which arose in the process of concluding the contract;
• Both parties understand and accept the terms of payment within the framework of the concluded agreement;
• The contract contains the characteristics of the commercial terms approved by the parties;
• According to the agreement, the probability of receiving a cash flow in a certain amount is assumed, the risks of non-receipt of payments are assessed;
• The agreement has the ability to use such additional conditions as price assignment, discount, postponement, increase and other changes in the financial part of the transaction, which may affect the company's revenue, but come into force only after agreement by the parties.

2.Identification and classification of liabilities... In this process, the firm determines the units of account in the transaction (the constituent parts) for which the contract price will be allocated to the revenue that the company can recognize. It is important to take into account the so-called “separability” criterion, when goods sold in packages are accounted for separately from individually supplied goods.

3.Transaction price... An indicative indicator of future revenue, which in reality is the estimated amount of the company's remuneration for fulfilling its obligations under the contract. The price can be a highly variable indicator, since it is often not fixed by the contract and includes, for example, the variable part of the transaction, it also depends on exchange rates and other conditions that ultimately affect the revenue that will be recognized by the company. According to IFRS, a transaction is also assessed according to the criterion of planned value (sometimes also called “expected value”) and the probability of receiving the specified transaction. The simplest example can be considered a foreign exchange transaction, in which the expected value is now equal to one amount, but the probability of getting exactly this expected value is extremely low due to the high volatility of the exchange rate. In such a situation, each company counts individually, since for some, a 2% change in rate is very critical, while for others it is a business margin of error.

4.Segmentation of the price into component parts of obligations... To divide the price into contractual obligations, economists are advised to take all separable parts of the commodity and allocate a fair price for each by one of the available methods: check and adjust market prices for analogs, estimate their expected costs in conjunction with the planned margin. Then you get the most correct price for the individual components of the contract.

5.Recognize revenue... Revenue can be recognized only when the company has fulfilled its obligations under this segment of the contract. In fact, you can take a certain point in time, estimate how many obligations are fulfilled and, based on this, recognize the actual values ​​of revenue. This approach is most productive because it makes it possible to avoid double actions in cases where the selling prices and conditions are not completely clear, and there is also no main reason (the fact of transfer of goods) for a payment obligation to arise. Thus, it can be said that revenue is recognized when the buyer takes possession of the corresponding tangible assets that are transferred to him in the course of the interaction.

Practical Application: Additional Features of IFRS 15 Revenue from Contracts with Customers

As with any other IFRS, IFRS 15 has additional requirements and considerations that must be taken into account by entities complying with this standard.

Features of consideration of receivables... Accounts receivable in the understanding of IFRS is the unconditional right of the company to the proceeds (more specifically, the right to reimbursement), which is unconditional within the framework of the contract. In fact, there is nothing in danger of a receivable as an element prior to the emergence of revenue if the fact of payment is delayed only by the agreed terms of the contract. But in the event that the amount of receivables and the amount of recognized revenue as a result differ from each other, this difference should be presented as justified expenses, for example, from losses.

Peculiarities of treating contracts with buyers as obligations to transfer goods and payments. When all or part of the terms of the contract entered into, the entity must present the contract in the statement of financial position either as an asset or as a contract liability, depending on the proportion of obligations fulfilled and payments made. In this case, the receivable is presented separately as a right to receive reimbursement / consideration. The contract itself assumes that the organization has both the right to a refund and a whole range of obligations under this contract. But the right of the organization to compensation arises from the very fact of the contract and requires the organization to take into account the fact of depreciation of the asset under the contract if the conditions and terms of receipt of the actual payment for the goods are violated. This standard uses certain terminology to describe these matters, but does not limit the company in the use of other names and the implementation of its own terminology in the statement of financial position.

Disclosure considerations... The key goal of the IFRS 15 standard, by analogy with others, is the formation of such a system and documentary reporting that will be the most transparent and reliable. According to this logic, IFRS 15 assumes a method and completeness of disclosures that provide users of financial statements with the maximum opportunity to understand the amounts and characteristics of revenue recognition, as well as disclosure of uncertainties related to revenue, liabilities and cash flows from contracts with customers. The features of such detailing in the disclosure of information include:

• Separation of revenue into segments and components of contracts;
• Segmentation of receivables;
• An indication of the essential terms of payment or performance of contracts;
• Disclosure of types of guarantees and other obligations;
• An indication of revenue recognized in the period for obligations fulfilled earlier;
• Depreciation and any costs associated with the loss of the value of the reimbursement.

Features of consideration of the organization's obligations to its customers... The company must disclose to the users of the reports, in the most reliable and detailed form, the contractual obligations assumed: the conditions for the release of goods, the specifics of shipments, the financing of supplies, the characteristics of goods and services that are subject to the company's obligations, the conditions of returns and guarantees.

Objective problems

Today, the issue of deliberate manipulations with revenue indicators in order to distort and form a favorable conclusion for the business on the result of considering the statements is quite acute. Revenue itself is the most abusive asset of a company due to its nature and the potential for distortion, manipulation, concealment or simple theft.

Often, financial statements are distorted for the immediate benefit of specific management employees or financial managers, who, due to deliberately overstating indicators on paper, are planning to obtain significant bonus payments ignoring the violation of the law, the formation of "holes" in corporate finance and misleading investors.

Another frequent problem, especially relevant for Russia, is the attempt by companies to steal part of their revenues into the shadows so as not to pay taxes in the prescribed amount. Of course, deliberate manipulation is always a complex action, initiated by someone and executed by someone, but at the level of strategic partners, the implementation of the IFRS 15 standard in a controlled company at least reduces the risk and creates significant barriers to such abuse. ...

Conclusions and conclusion

When the developed standard “IFRS 15 Revenue from contracts with customers” is introduced into practice, companies will receive a system based on special principles for reflecting business information useful to users, which characterizes and discloses all aspects of the amount, time distribution, reasons and conditions for the occurrence of revenue and cash flows generated the company through contracts with customers.

When applying this standard, the company's management team and financial managers should be as careful as possible in the analysis, interpretation and detailing of all possible conditions, facts, circumstances and consequences arising in the course of business activities of contracts on the execution of which the emergence of cash flows for the company depends on.

The implementation of IFRS 15 will allow the company to identify the most significant and significant revenue streams and types of contacts, due to which the main cash flow of the organization arises. Such segmentation can, in a managerial sense, help a company pay more attention to those deals and segments that are the most monetary for it in terms of the ratio of revenue and terms of execution of such contracts. Thanks to the control system incorporated within the IFRS 15 standard, companies will gradually improve their own documentary system and consistently eliminate the risks that were previously assumed due to insufficient attention to contractual relationships with clients.

Using the standard on an ongoing basis will help all organizations, but depending on the business area and internal structure, the standard will have a different impact on each organization. For example, the involvement in the information field of the business and the level of awareness will significantly increase. stakeholders in industries that have traditionally been fairly isolated from the disclosure of important information. Here we are talking about all kinds of digital and digital companies, telecommunications, technology and innovative business... Companies working on multi-component contracts, which include many stages, each of which has its own limit of obligations, timing and cost, should receive a huge benefit from the implementation of the standard.

In parallel, due to the work in accordance with IFRS 15, the company will undergo organic changes. organizational structure and discipline of transactions, by establishing strong intracorporate relationships, as well as a system of continuous exchange and coordination of information between employees of the accounting / financial department and employees responsible for sales. In addition to the above, an increase in the efficiency of the company as a whole can be expected due to the indirect impact of IFRS 15 on key performance indicators and personnel remuneration systems.

Polina Sungurova Deputy Director of the International Reporting Department of FBK
Journal "Actual accounting"

The date of the mandatory application in Russia of IFRS 15 Revenue from Contracts with Customers (hereinafter referred to as IFRS 15) is yet to be agreed. The fact is that the International Accounting Standards Board (IASB) recently issued clarifications, according to which the date of the beginning of its general application was postponed from January 1, 2017 to January 1, 2018. Moreover, in Russian legislation no clarifications have yet been made (order of the Ministry of Finance of Russia dated January 21, 2015 No. 9n).

However, this standard can be applied early - from the moment of its official publication by the IASB in May 2014.

In favor of early application is the fact that the new standard has formed uniform approaches to accounting for revenue from different types contracts and it replaces IAS 11 Construction Contracts (hereinafter IAS 11) and IAS 18 Revenue (hereinafter IAS 18).

IFRS 15 offers a more structured approach to revenue accounting, providing universal criteria for different contracts, avoiding all the ambiguities and unnecessarily general provisions of previous standards. If earlier there were different accounting models depending on what exactly was the subject of the contract - the sale of goods, the provision of services or construction, now all this is linked into a single mechanism with more detailed accounting details.

Features of the application of IFRS 15

The new standard proposes several basic steps to be taken to recognize revenue for a specific contract. Let's consider them.

Step 1. First, you need to understand whether all the criteria for recognizing a contract are met:

• the contract must be approved in any form by all parties;
• the contract must define the rights of the parties in relation to the transferred goods, works, services and the terms of their payment;
• payment must be probable.

At this stage, differences between the old and new standards, which may affect accounting, most often do not arise. However, due to the fact that IFRS 15 requires the ability and intention of the buyer to pay the consideration when due, the company needs to analyze criteria such as the buyer's ability to pay and its interest in the result of the work.

Step 2. Further, the obligations under the contract are determined, that is, what exactly the company is selling. Typically, it is a product, work or service that is distinguishable from others. It is the sale of the distinguishable item that will be the unit of revenue accounting.

Distinct goods, works or services (products) are defined in the contract only if two conditions are simultaneously fulfilled:

• the buyer can independently use these products separately from other products under the contract;
• these products can be separately identified.

For most transactions, the accounting for revenue under the old and new standards will not differ in the composition of the products sold. However, in cases where the contracts provide for the sale of combined products (for example, the provision of services with the simultaneous provision of equipment for their use; provision of a discount for one product in the event of the purchase of another product; sale of a license agreement for a product with the simultaneous provision of services for its promotion; sale of equipment with additional services on its post-warranty service), there will be differences that can significantly change the reporting indicators.

Step 3. Upon completion of the process of identifying obligations under the contract, the total price of the contract is determined, that is, the revenue from its conclusion is estimated. At this stage, the company must take into account the following nuances:

• variable component of the contract value;
• significant financing component;
• non-monetary compensation.

Let's figure out each item in more detail.

The variable component of the contract value (discounts, credits, product returns, bonuses). IAS 18 proposed only to determine whether it is probable that future economic benefits will flow from the transaction and whether all the risks and rewards of ownership of the product have been transferred to the customer, and if these criteria are not met, then revenue should not be recognized.

IFRS 15 uses the concept of “transfer of control” instead of “transfer of risks and rewards” and specifies criteria for assessing the probability of occurrence of those events that determine the possibility of revenue recognition. Revenue can now be recognized if, based on experience and statistics, the company can determine the minimum amount that will be received with a high degree of probability.

It turns out that in some cases, revenue can be recognized at an earlier stage than IAS 18 suggested.

Significant financing component. IAS 18 considered the issue of granting the so-called merchandise credit only from the seller's side.

The reverse situation, where the buyer finances the seller, was not considered, as IAS 18 requires revenue to be measured at the fair value of the consideration received. It turns out that the situation with financing from the buyer - in fact, mirror - is reflected in the accounting in a completely different way.

IFRS 15 has significantly changed the approach to reflecting the financing component. The amount of revenue reflects the price that the buyer would pay in cash at the time of the transition to the promised goods or services. A new term has appeared - the "cash" sale price.

Let's look at an example.

Example

According to IAS 18. If the company sold the goods for 1 210 000 rubles. payable after two years, it was necessary to discount the amount of the proceeds (assume the discount rate is 10%) over a period of two years.

The company could have recorded revenue in the amount of:

RUB 1,210,000 : (1 + 10%) x 2 years = 1,000,000 rubles, and then within two years to recognize interest income in the amount of 210,000 rubles. (for the entire period).

If the buyer paid an advance in the amount of 1,000,000 rubles, and the goods were delivered to him only after two years, first the seller recognized the payables in full in advance (1,000,000 rubles), and then, two years later, the proceeds in the same size.

According to IFRS 15. The situation with the provision of a commodity loan to a buyer under IFRS 15 will be reflected in the same way.

In the case of advance delivery, if the buyer has paid the advance two years before the receipt of the goods, then a contractual obligation must first be recognized ( accounts payable on advance) in the amount of 1,000,000 rubles, and then, within two years, interest expenses will be recognized increasing this contractual obligation to 1,210,000 rubles. After two years, revenue will be recognized in the amount of the resulting liability. The result will be the recognition of revenue in the amount of RUB 1,210,000. and interest expenses in the amount of 210,000 rubles.

Note that the difference between the amount under the contract and the cash sale price may not be the result of financing, but be caused by other factors, for example, the reflection of the risks of non-fulfillment of obligations under the contract for one of the parties. In such a situation, the effect of financing should not be reflected.

In the case of non-monetary compensation, the requirements of the old and new standards do not differ in essence. If for the good or service under the contract, payment is not received in the form of cash consideration, then revenue should be recorded at the fair value of the assets received.

Step 4. IFRS 15 introduced new stage- distribution of the price per unit of revenue accounting. As we discussed above, one contract may provide for the supply of goods and services that are distinguishable from each other. The timing of revenue recognition for these distinct components can vary. Among other things, the new standard defines how the total contract discounts should be allocated for each component separately.

IAS 18 does not prescribe how the discount will be allocated. The only provision of the standard to guide the distribution is that revenue should be measured at the fair value of the consideration received. Thus, in each individual case, it is necessary to analyze the sale transaction and prescribe the details in the accounting policy.

IFRS 15 clearly states that the selling price should be allocated to each performance obligation, that is, to each distinct product in proportion to the stand-alone selling price. The stand-alone selling price is the price at which a company would sell a promised good or service separately to a customer. It is best evidenced by the observed price of the distinguished good or service, including the list price.

Example

Let's consider the accounting of the sale by a mobile operator of the "service + goods" package (mobile communication for a year and a smartphone). The total cost of the package is 5,000 rubles. The cost of a smartphone in case of its separate purchase is 2,990 rubles, and the monthly cost of a service package after the first year is 400 rubles. per month. Thus, when buying a package, the discount is:

2990 RUB + 400 rub. x 12 months - 5000 rubles. = RUB 2790

It is necessary to distribute a discount in the amount of RUB 2,790. on both components.

The separate price of a smartphone is:

2990 RUB : (2,990 rubles + 400 rubles x 12 months) x 100% = 38% of the total cost.

The separate cost of mobile services for one year is:

(400 rubles x 12 months): 7790 rubles. x 100% = 62% of the total cost.

Thus, the company must recognize at a time the revenue from the sale of the smartphone in the amount of:

RUB 5,000 x 38% = 1900 rubles.

and monthly proceeds from the sale of mobile services in the amount of:

(5000 - 1900): 12 months = 258.33 rubles.

Another fairly common situation is when companies provide services, while providing free equipment to the buyer's property for using these services, for example, a modem when providing Internet connection services. For IAS 18, the sale of such a component is invisible, the revenue from its sale is nil, and only revenue from the Internet connection service will be recognized. According to IFRS 15, the revenue will be distributed in proportion to the stand-alone selling price.

Step 5. It is necessary to determine when revenue is recognized. On the final stage the company decides the question: will revenue be recognized one-time or over a certain period of time?

IAS 18 requires the recognition of revenue when or as the firm fulfills its obligation to perform a contract by transferring a promised good or providing a service to a customer. The asset is transferred at the time or as the buyer gains control of it. However, in some cases, revenue should be recognized over a certain period of time using the performance or input method, depending on the nature of the goods or services sold. Such cases arise when:

• the buyer simultaneously receives and consumes the benefits associated with the fulfillment of the obligation by the seller as it is fulfilled, that is, it provides periodic recurring services;
• As the seller fulfills its obligation, an asset is created or improved over which the buyer gains control as the asset is created or improved, such as building a building;
• the product being created has no alternative use, and the seller's right to receive payment for the completed part of the work is protected, for example, he creates unique software for the needs of the client.

In all other cases, revenue is recognized on a one-off basis.

IFRS 15 clarifies the possibility and specifics of revenue recognition for different situations (right to return, guarantees, options, repurchase agreements, and others). For example, to account for transfers of products with a right of return, the selling company must recognize:

• Revenue from the transferred product in the amount of the consideration it expects to be entitled to (thus, revenue will not be recognized for the product expected to be returned);
• commitment to refund;
• an asset (and the corresponding adjustment to cost of sales) in relation to the right to receive products from customers when fulfilling the obligation to return the funds.

Example

According to IAS 18, if the company wholesale trade sells goods retail store and after the purchase of goods, the store had the opportunity to return unsold goods within a month, in the reporting of the wholesale company, revenue was recognized only at the moment when the return of goods from the store became impossible.

Similarly, when selling apartments by an investor at an early stage of construction, revenue was recognized in the reporting only when the buyer signed an act of transferring the apartment, and this happened only after the house was fully built and accepted by the state commission.

Under IFRS 15, a wholesaler can recognize revenue based on retail store returns statistics. Revenue from those goods that are not returned with a high degree of probability can be recognized as soon as they are transferred to the retail store for sale. And for those goods for which a possible return is expected - recognize the obligation. For example, if a company sells goods for only 120 rubles, of which it is sure that goods for 100 rubles will not be returned, then revenue for 100 rubles should be recognized in the reporting. and an obligation to return 20 rubles.

In many cases, the investor can reflect the sale of apartments natural person at the moment when he, having analyzed the experience and statistics of sales and acceptance of similar objects by the state commission, has the right to assert that with a very high degree of probability the act of transferring the apartment in the future will be signed by the buyer.

The new standard also provides much more detailed guidance on how to account for areas such as contract costs (including, for example, contracting costs), warranties and licenses. At the same time, companies will have to provide information in disclosures in more detail.

In conclusion, we note that the accounting for revenue when applying IFRS 15 instead of IAS 11 and IAS 18 will change significantly for many entities. Companies that are involved in the licensing and sale of software, telecommunications, construction, the defense industry, and asset management were at risk. They will have to form new assessments and professional judgments, and possibly rebuild processes. accounting, as the moment and in general the possibility of revenue recognition and its measurement will change.