Lastly IFRS 15 requires that the entity should test for the existence of a “significant financing component” in the contract, this will occur if: “the timing of payments agreed
by the parties to the contract provides the customer or the entity with a significant benefit of financing the transfer of goods or services to the customer” If the above-mentioned is applicable, the transaction price will be adjusted to
eliminate the effect of this benefit.
 History A main purpose of the project to develop IFRS 15 was that, although revenue is a critical metric for financial statement users, there were important differences
between the IASB and FASB definitions of revenue, and there were different definitions of revenue even within each board’s guidance for similar transactions accounting for under different standards.
Recognize revenue as the performance obligations are fulfilled Relative to previous accounting guidance, IFRS 15 may cause revenue to be recognized earlier in some cases,
but later in others.
Firstly, an entity has to measure the amount of non-cash consideration in a contract in terms of IFRS 13: fair value measurement.
 Recognize revenue as the performance obligations fulfilled (Service) An entity can recognize revenue when performance obligations have been settled, a performance
obligation has been settled when the customer has received all the benefits associated with the performance obligation, and is able to use and enjoy the asset to his or her own discretion.
This is simply done by calculating the net present value of the payments (if the satisfaction of performance obligations is prior to the payment date), or by calculating the
net future value (if the payment date is prior to the satisfaction of performance obligations).
 Identify all the individual performance obligations within the contract A good or service that is to be delivered in terms of a contract with a customer qualifies
as a performance obligation if the good or service is “distinct”.
 Determine the transaction price In most cases the transaction price to be paid will be stipulated in the contract and quite easy to calculate; however certain circumstances
require that a transaction price should be estimated by other methods.
 Identify the contract with a customer According to IFRS 15, the following criteria have to be met before a contract can be identified; 1. both parties have to approve
the contract and are committed to perform; 2. and the entity can identify each party’s rights and obligations in terms of the contract; and 3. there are clear payment terms in the contract, and the contract has “commercial substance”.
 Performance obligations settled over time The performance obligations will be settled in the measure of progress towards completion, the measure of progress can
be either based on the inputs (in the case of manufactured goods), or the output method.
Secondly, a contract can have variable consideration (for example, the transaction price is subject to settlement discount should the client pay within a certain time frame).
The difference (between the amount recognized after adjustment for a significant financing component and amount of consideration to be received) is simply recognized as interest
income/ expense in terms of the accrual basis of accounting as mentioned in IAS 1.
[‘1. “IASB confirms deferral of effective date by issuing formal amendment to the revenue Standard”. IFRS Foundation.
2. ^ Jump up to:a b “IASB and FASB issue new revenue recognition standard — IFRS 15” (PDF). Ernst & Young. May 2014. Retrieved 2014-09-01.
Jump up to:a b c d “IASB and FASB issue converged Standard on revenue recognition”. IASB. 28 May 2014. Retrieved 2014-09-01.
4. ^ Jump up to:a b c d e “IASB and AccountingFASB issue new, converged revenue standards”. Deloitte. 28 May 2014. Retrieved
5. ^ “First Impressions: Revenue from contracts with customers” (PDF). KPMG. April 2016. Retrieved 2018-12-09.
6. ^ Jump up to:a b c d Koppeschaar, ZR (2015). Introduction to IFRS. Durban: LexisNexis. pp. 290–311. ISBN 9780409118445.
Jump up to:a b “A closer look at the new revenue recognition standard” (PDF). Ernst and Young. Ernst and Young. 1 June 2015. Retrieved 6 June 2016.
8. ^ Jump up to:a b IFRS (2015). Guide through IFRS. London: SAICA. pp. 763–824. ISBN 9780409121001.
“IFRS 15: Contract Assets and Contract Liabilities”. IFRScommunity.com. Retrieved 2019-02-21.
10. ^ PricewaterhouseCoopers. “In brief: FASB finalizes one-year deferral of the new revenue standard”. PwC. Retrieved 2016-05-18.
11. ^ PricewaterhouseCoopers.
“In brief: IASB proposes changes to revenue standard – more FASB proposals coming soon”. PwC. Retrieved 2016-05-18.
Photo credit: https://www.flickr.com/photos/ianjmatchett/6140693467/’]