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Basis For Conclusions On IFRS 15 Satisfaction Of Performance Obligation

Basis For Conclusions On IFRS 15 Satisfaction Of Performance Obligation

Basis For Conclusions On IFRS 15 Satisfaction Of Performance Obligation: An entity, a contractor, enters into a contract to build a hospital for a customer. The entity is responsible for the overall management of the project and identifies various goods and services to be provided, including engineering, site clearance, foundation, procurement, construction of the structure, piping and wiring, installation of equipment and finishing.

Basis For Conclusions On IFRS 15 Satisfaction Of Performance Obligation

Basis For Conclusions On IFRS 15 Satisfaction Of Performance Obligation :The promised goods and services are capable of being distinct in accordance. That is, the customer can benefit from the goods and services either on their own or together with other readily available resources. This is evidenced by the fact that the entity, or competitors of the entity, regularly sells many of these goods and services separately to other customers. In addition, the customer could generate economic benefit from the individual goods and services by using, consuming, selling or holding those goods or services.

Basis For Conclusions On IFRS 15 Satisfaction Of Performance Obligation

Basis For Conclusions On IFRS 15 Satisfaction Of Performance Obligation :However, the goods and services are not distinct within the context of the contract in accordance  of IFRS 15 . That is, the entity’s promise to transfer individual goods and services in the contract are not separately identifiable from other promises in the contract. This is evidenced by the fact that the entity provides a significant service of integrating the goods and services (the inputs) into the hospital (the combined output) for which the customer has contracted.

Basis For Conclusions On IFRS 15 Satisfaction Of Performance Obligation

Basis For Conclusions On IFRS 15 Satisfaction Of Performance Obligation : IFRS 15 applies to a single contract with a customer. In many cases, the contract that is accounted for separately will be the individual contract negotiated with the customer. However, the structure and scope of a contract can vary depending on how the parties to the contract decide to record their agreement. For instance, there may be legal or commercial reasons for the parties to use more than one contract to document the sale of related goods or services or to use a single contract to document the sale of unrelated goods or services. One of the boards’ objectives in developing IFRS 15 is that the accounting for a contract should depend on an entity’s present rights and obligations rather than on how the entity structures the contract.

Basis For Conclusions On IFRS 15 Satisfaction Of Performance Obligation

Basis For Conclusions On IFRS 15 Satisfaction Of Performance Obligation :The boards decided that entering into contracts at or near the same time is a necessary condition for the contracts to be combined. That decision is consistent with the objective of identifying the contract that is to be accounted for as the unit of account because that assessment is also performed at contract inception.

Basis For Conclusions On IFRS 15 Satisfaction Of Performance Obligation

Basis For Conclusions On IFRS 15 Satisfaction Of Performance Obligation :
(a) dividends received (although these requirements existed in previous revenue Standards in IFRS, the IASB has moved them unchanged, and without changing their effect, into IFRS 9 Financial Instruments);
(b) non-exchange transactions (for example, donations or contributions received);
(c) for IFRS, changes in the value of biological assets, investment properties and the inventory of commodity broker-traders; and
(d) for US GAAP, changes in regulatory assets and liabilities arising from alternative revenue programmes for rate-regulated entities in the scope of Topic 980 on regulated operations. (The FASB decided that the revenue arising from those assets or liabilities should be presented separately from revenue arising from contracts with customers.

Basis For Conclusions On IFRS 15 Satisfaction Of Performance Obligation

Basis For Conclusions On IFRS 15 Satisfaction Of Performance Obligation :The boards decided not to amend the existing definitions of revenue in each of their conceptual frameworks. The boards decided that they will consider the definition of revenue when they revise their respective conceptual frameworks. However, the IASB decided to carry forward into IFRS 15 the description of revenue from the IASB’s Conceptual Framework for Financial Reporting rather than the definition of revenue from a previous revenue Standard. The IASB noted that the definition in a previous revenue Standard referred to ‘gross inflow of economic benefits’ and it had concerns that some might have misread that reference as implying that an entity should recognise as revenue a prepayment from a customer for goods or services. As described , the principle is that revenue is recognised in accordance with IFRS 15 as a result of an entity satisfying a performance obligation in a contract with a customer. In addition, the FASB decided to carry forward a definition of revenue that is based on the definition in FASB Concepts Statement No. 6 Elements of Financial Statements.

Basis For Conclusions On IFRS 15 Satisfaction Of Performance Obligation

Basis For Conclusions On IFRS 15 Satisfaction Of Performance Obligation :In December 2008, the boards published for public comment the Discussion Paper Preliminary Views on Revenue Recognition in Contracts with Customers and received more than 200 comment letters in response. In the Discussion Paper, the boards proposed the general principles of a contract-based revenue recognition model with a measurement approach that was based on an allocation of the transaction price. That revenue recognition model was developed after extensive discussions by the boards on alternative models for recognising and measuring revenue.

Basis For Conclusions On IFRS 15 Satisfaction Of Performance Obligation

Basis For Conclusions On IFRS 15 Satisfaction Of Performance Obligation : Respondents to the Discussion Paper generally supported the objective of developing a comprehensive revenue recognition model for both IFRS and US GAAP. Most respondents also generally supported the recognition and measurement principles proposed in the Discussion Paper, which are the basic building blocks of the revenue recognition model. In particular, the Discussion Paper introduced the concepts that a contract contains performance obligations for the entity to transfer goods or services to a customer and that revenue is recognised when the entity satisfies its performance obligations as a result of the customer obtaining control of those goods or services.

Basis For Conclusions On IFRS 15 Satisfaction Of Performance Obligation

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