IFRS15
RevenuefromContractswithCustomers
InApril2001theInternationalAccountingStandardsBoard(theBoard)adoptedIAS11ConstructionContractsandIAS18Revenue,bothofwhichhadoriginallybeenissuedbytheInternationalAccountingStandardsCommittee(IASC)inDecember1993.IAS18replacedapreviousversion:RevenueRecognition(issuedinDecember1982).IAS11replacedpartsofIAS11AccountingforConstructionContracts(issuedinMarch1979).
InDecember2001theBoardissuedSIC-31Revenue—BarterTransactionsInvolvingAdvertisingServices.TheInterpretationwasoriginallydevelopedbytheStandardsInterpretationsCommitteeoftheIASCtodeterminethecircumstancesinwhichasellerofadvertisingservicescanreliablymeasurerevenueatthefairvalueofadvertisingservicesprovidedinabartertransaction.
InJune2007theBoardissuedIFRIC13CustomerLoyaltyProgrammes.TheInterpretationwasdevelopedbytheIFRSInterpretationsCommittee(the‘InterpretationsCommittee’)toaddresstheaccountingbytheentitythatgrantsawardcreditstoitscustomers.
InJuly2008theBoardissuedIFRIC15AgreementsfortheConstructionofRealEstate.TheInterpretationwasdevelopedbytheInterpretationsCommitteetoapplytotheaccountingforrevenueandassociatedexpensesbyentitiesthatundertaketheconstructionofrealestatedirectlyorthroughsubcontractors.
InJanuary2009theBoardissuedIFRIC18TransfersofAssetsfromCustomers.TheInterpretationwasdevelopedbytheInterpretationsCommitteetoapplytotheaccountingfortransfersofitemsofproperty,plantandequipmentbyentitiesthatreceivesuchtransfersfromtheircustomers.
InMay2014theBoardissuedIFRS15RevenuefromContractswithCustomers,togetherwiththeintroductionofTopic606intotheFinancialAccountingStandardsBoard’sAccountingStandardsCodification®.IFRS15replacesIAS11,IAS18,IFRIC13,IFRIC15,IFRIC18andSIC-31.IFRS15providesacomprehensiveframeworkforrecognisingrevenuefromcontractswithcustomers.
InSeptember2015theBoardissuedEffectiveDateofIFRS15whichdeferredthemandatoryeffectivedateofIFRS15to1January2018.
InApril2016theBoardissuedClarificationstoIFRS15RevenuefromContractswithCustomersclarifyingtheBoard’sintentionswhendevelopingsomeoftherequirementsinIFRS15.TheseamendmentsdonotchangetheunderlyingprinciplesofIFRS15butclarifyhowthoseprinciplesshouldbeappliedandprovideadditionaltransitionalrelief.
OtherStandardshavemademinorconsequentialamendmentstoIFRS15,includingIFRS16Leases(issuedJanuary2016).
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CONTENTS
fromparagraph
INTERNATIONALFINANCIALREPORTINGSTANDARD15REVENUEFROMCONTRACTSWITHCUSTOMERS
OBJECTIVE
MeetingtheobjectiveSCOPERECOGNITION
IdentifyingthecontractCombinationofcontractsContractmodifications
IdentifyingperformanceobligationsSatisfactionofperformanceobligationsMEASUREMENT
Determiningthetransactionprice
AllocatingthetransactionpricetoperformanceobligationsChangesinthetransactionpriceCONTRACTCOSTS
IncrementalcostsofobtainingacontractCoststofulfilacontractAmortisationandimpairmentPRESENTATIONDISCLOSURE
Contractswithcustomers
SignificantjudgementsintheapplicationofthisStandard
Assetsrecognisedfromthecoststoobtainorfulfilacontractwithacustomer
PracticalexpedientsAPPENDICESADefinedtermsBApplicationGuidanceCEffectivedateandtransitionDAmendmentstootherStandards
FORTHEACCOMPANYINGDOCUMENTSLISTEDBELOW,SEEPARTBOFTHISEDITION
APPROVALBYTHEBOARDOFIFRS15ISSUEDINMAY2014APPROVALBYTHEBOARDOFAMENDMENTSTOIFRS15:EffectiveDateofIFRS15issuedinSeptember2015
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ClarificationstoIFRS15RevenuefromContractswithCustomersissuedinApril2016
BASISFORCONCLUSIONSDISSENTINGOPINION
APPENDICES
AComparisonofIFRS15andTopic606
BAmendmentstotheBasisforConclusionsonotherStandardsILLUSTRATIVEEXAMPLES
APPENDIX
AmendmentstotheguidanceonotherStandards
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InternationalFinancialReportingStandard15RevenuefromContractswithCustomers(IFRS15)issetoutinparagraphs1–129andAppendicesA–D.Alltheparagraphshaveequalauthority.Paragraphsinboldtypestatethemainprinciples.TermsdefinedinAppendixAareinitalicsthefirsttimethattheyappearintheStandard.DefinitionsofothertermsaregivenintheGlossaryforInternationalFinancialReportingStandards.TheStandardshouldbereadinthecontextofitsobjectiveandtheBasisforConclusions,thePrefacetoInternationalFinancialReportingStandardsandtheConceptualFrameworkforFinancialReporting.IAS8AccountingPolicies,ChangesinAccountingEstimatesandErrorsprovidesabasisforselectingandapplyingaccountingpoliciesintheabsenceofexplicitguidance.
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InternationalFinancialReportingStandard15RevenuefromContractswithCustomers
Objective
1
TheobjectiveofthisStandardistoestablishtheprinciplesthatanentityshallapplytoreportusefulinformationtousersoffinancialstatementsaboutthenature,amount,timinganduncertaintyofrevenueandcashflowsarisingfromacontractwithacustomer.
Meetingtheobjective
2
Tomeettheobjectiveinparagraph1,thecoreprincipleofthisStandardisthatanentityshallrecogniserevenuetodepictthetransferofpromisedgoodsorservicestocustomersinanamountthatreflectstheconsiderationtowhichtheentityexpectstobeentitledinexchangeforthosegoodsorservices.
AnentityshallconsiderthetermsofthecontractandallrelevantfactsandcircumstanceswhenapplyingthisStandard.AnentityshallapplythisStandard,includingtheuseofanypracticalexpedients,consistentlytocontractswithsimilarcharacteristicsandinsimilarcircumstances.
ThisStandardspecifiestheaccountingforanindividualcontractwithacustomer.However,asapracticalexpedient,anentitymayapplythisStandardtoaportfolioofcontracts(orperformanceobligations)withsimilarcharacteristicsiftheentityreasonablyexpectsthattheeffectsonthefinancialstatementsofapplyingthisStandardtotheportfoliowouldnotdiffermateriallyfromapplyingthisStandardtotheindividualcontracts(orperformanceobligations)withinthatportfolio.Whenaccountingforaportfolio,anentityshalluseestimatesandassumptionsthatreflectthesizeandcompositionoftheportfolio.
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4
Scope
5
AnentityshallapplythisStandardtoallcontractswithcustomers,exceptthefollowing:(a)(b)(c)
leasecontractswithinthescopeofIFRS16Leases;
insurancecontractswithinthescopeofIFRS4InsuranceContracts;financialinstrumentsandothercontractualrightsorobligationswithinthescopeofIFRS9FinancialInstruments,IFRS10ConsolidatedFinancialStatements,IFRS11JointArrangements,IAS27SeparateFinancialStatementsandIAS28InvestmentsinAssociatesandJointVentures;and
non-monetaryexchangesbetweenentitiesinthesamelineofbusinesstofacilitatesalestocustomersorpotentialcustomers.Forexample,thisStandardwouldnotapplytoacontractbetweentwooilcompaniesthatagreetoanexchangeofoiltofulfildemandfromtheircustomersindifferentspecifiedlocationsonatimelybasis.
(d)
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AnentityshallapplythisStandardtoacontract(otherthanacontractlistedinparagraph5)onlyifthecounterpartytothecontractisacustomer.Acustomerisapartythathascontractedwithanentitytoobtaingoodsorservicesthatareanoutputoftheentity’sordinaryactivitiesinexchangeforconsideration.Acounterpartytothecontractwouldnotbeacustomerif,forexample,thecounterpartyhascontractedwiththeentitytoparticipateinanactivityorprocessinwhichthepartiestothecontractshareintherisksandbenefitsthatresultfromtheactivityorprocess(suchasdevelopinganassetinacollaborationarrangement)ratherthantoobtaintheoutputoftheentity’sordinaryactivities.AcontractwithacustomermaybepartiallywithinthescopeofthisStandardandpartiallywithinthescopeofotherStandardslistedinparagraph5.(a)
IftheotherStandardsspecifyhowtoseparateand/orinitiallymeasureoneormorepartsofthecontract,thenanentityshallfirstapplytheseparationand/ormeasurementrequirementsinthoseStandards.Anentityshallexcludefromthetransactionpricetheamountofthepart(orparts)ofthecontractthatareinitiallymeasuredinaccordancewithotherStandardsandshallapplyparagraphs73–86toallocatetheamountofthetransactionpricethatremains(ifany)toeachperformanceobligationwithinthescopeofthisStandardandtoanyotherpartsofthecontractidentifiedbyparagraph7(b).
IftheotherStandardsdonotspecifyhowtoseparateand/orinitiallymeasureoneormorepartsofthecontract,thentheentityshallapplythisStandardtoseparateand/orinitiallymeasurethepart(orparts)ofthecontract.
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(b)
8
ThisStandardspecifiestheaccountingfortheincrementalcostsofobtainingacontractwithacustomerandforthecostsincurredtofulfilacontractwithacustomerifthosecostsarenotwithinthescopeofanotherStandard(seeparagraphs91–104).Anentityshallapplythoseparagraphsonlytothecostsincurredthatrelatetoacontractwithacustomer(orpartofthatcontract)thatiswithinthescopeofthisStandard.
Recognition
Identifyingthecontract
9
AnentityshallaccountforacontractwithacustomerthatiswithinthescopeofthisStandardonlywhenallofthefollowingcriteriaaremet:(a)
thepartiestothecontracthaveapprovedthecontract(inwriting,orallyorinaccordancewithothercustomarybusinesspractices)andarecommittedtoperformtheirrespectiveobligations;theentitycanidentifyeachparty’srightsregardingthegoodsorservicestobetransferred;
theentitycanidentifythepaymenttermsforthegoodsorservicestobetransferred;
(b)(c)
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(d)
thecontracthascommercialsubstance(ietherisk,timingoramountoftheentity’sfuturecashflowsisexpectedtochangeasaresultofthecontract);and
itisprobablethattheentitywillcollecttheconsiderationtowhichitwillbeentitledinexchangeforthegoodsorservicesthatwillbetransferredtothecustomer.Inevaluatingwhethercollectabilityofanamountofconsiderationisprobable,anentityshallconsideronlythecustomer’sabilityandintentiontopaythatamountofconsiderationwhenitisdue.Theamountofconsiderationtowhichtheentitywillbeentitledmaybelessthanthepricestatedinthecontractiftheconsiderationisvariablebecausetheentitymayofferthecustomerapriceconcession(seeparagraph52).
(e)
10
Acontractisanagreementbetweentwoormorepartiesthatcreatesenforceablerightsandobligations.Enforceabilityoftherightsandobligationsinacontractisamatteroflaw.Contractscanbewritten,oralorimpliedbyanentity’scustomarybusinesspractices.Thepracticesandprocessesforestablishingcontractswithcustomersvaryacrosslegaljurisdictions,industriesandentities.Inaddition,theymayvarywithinanentity(forexample,theymaydependontheclassofcustomerorthenatureofthepromisedgoodsorservices).Anentityshallconsiderthosepracticesandprocessesindeterminingwhetherandwhenanagreementwithacustomercreatesenforceablerightsandobligations.Somecontractswithcustomersmayhavenofixeddurationandcanbeterminatedormodifiedbyeitherpartyatanytime.Othercontractsmayautomaticallyrenewonaperiodicbasisthatisspecifiedinthecontract.AnentityshallapplythisStandardtothedurationofthecontract(iethecontractualperiod)inwhichthepartiestothecontracthavepresentenforceablerightsandobligations.
ForthepurposeofapplyingthisStandard,acontractdoesnotexistifeachpartytothecontracthastheunilateralenforceablerighttoterminateawhollyunperformedcontractwithoutcompensatingtheotherparty(orparties).Acontractiswhollyunperformedifbothofthefollowingcriteriaaremet:(a)(b)
theentityhasnotyettransferredanypromisedgoodsorservicestothecustomer;and
theentityhasnotyetreceived,andisnotyetentitledtoreceive,anyconsiderationinexchangeforpromisedgoodsorservices.
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12
13
Ifacontractwithacustomermeetsthecriteriainparagraph9atcontractinception,anentityshallnotreassessthosecriteriaunlessthereisanindicationofasignificantchangeinfactsandcircumstances.Forexample,ifacustomer’sabilitytopaytheconsiderationdeterioratessignificantly,anentitywouldreassesswhetheritisprobablethattheentitywillcollecttheconsiderationtowhichtheentitywillbeentitledinexchangefortheremaininggoodsorservicesthatwillbetransferredtothecustomer.
Ifacontractwithacustomerdoesnotmeetthecriteriainparagraph9,anentityshallcontinuetoassessthecontracttodeterminewhetherthecriteriainparagraph9aresubsequentlymet.
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Whenacontractwithacustomerdoesnotmeetthecriteriainparagraph9andanentityreceivesconsiderationfromthecustomer,theentityshallrecognisetheconsiderationreceivedasrevenueonlywheneitherofthefollowingeventshasoccurred:(a)
theentityhasnoremainingobligationstotransfergoodsorservicestothecustomerandall,orsubstantiallyall,oftheconsiderationpromisedbythecustomerhasbeenreceivedbytheentityandisnon-refundable;orthecontracthasbeenterminatedandtheconsiderationreceivedfromthecustomerisnon-refundable.
(b)
16
Anentityshallrecognisetheconsiderationreceivedfromacustomerasaliabilityuntiloneoftheeventsinparagraph15occursoruntilthecriteriainparagraph9aresubsequentlymet(seeparagraph14).Dependingonthefactsandcircumstancesrelatingtothecontract,theliabilityrecognisedrepresentstheentity’sobligationtoeithertransfergoodsorservicesinthefutureorrefundtheconsiderationreceived.Ineithercase,theliabilityshallbemeasuredattheamountofconsiderationreceivedfromthecustomer.
Combinationofcontracts
17
Anentityshallcombinetwoormorecontractsenteredintoatornearthesametimewiththesamecustomer(orrelatedpartiesofthecustomer)andaccountforthecontractsasasinglecontractifoneormoreofthefollowingcriteriaaremet:(a)(b)(c)
thecontractsarenegotiatedasapackagewithasinglecommercialobjective;
theamountofconsiderationtobepaidinonecontractdependsonthepriceorperformanceoftheothercontract;or
thegoodsorservicespromisedinthecontracts(orsomegoodsorservicespromisedineachofthecontracts)areasingleperformanceobligationinaccordancewithparagraphs22–30.
Contractmodifications
18
Acontractmodificationisachangeinthescopeorprice(orboth)ofacontractthatisapprovedbythepartiestothecontract.Insomeindustriesandjurisdictions,acontractmodificationmaybedescribedasachangeorder,avariationoranamendment.Acontractmodificationexistswhenthepartiestoacontractapproveamodificationthateithercreatesneworchangesexistingenforceablerightsandobligationsofthepartiestothecontract.Acontractmodificationcouldbeapprovedinwriting,byoralagreementorimpliedbycustomarybusinesspractices.Ifthepartiestothecontracthavenotapprovedacontractmodification,anentityshallcontinuetoapplythisStandardtotheexistingcontractuntilthecontractmodificationisapproved.
Acontractmodificationmayexisteventhoughthepartiestothecontracthaveadisputeaboutthescopeorprice(orboth)ofthemodificationorthepartieshaveapprovedachangeinthescopeofthecontractbuthavenotyetdeterminedthecorrespondingchangeinprice.Indeterminingwhethertherightsandobligationsthatarecreatedorchangedbyamodificationareenforceable,anentityshallconsiderallrelevantfactsandcircumstancesincludingthetermsof
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thecontractandotherevidence.Ifthepartiestoacontracthaveapprovedachangeinthescopeofthecontractbuthavenotyetdeterminedthecorrespondingchangeinprice,anentityshallestimatethechangetothetransactionpricearisingfromthemodificationinaccordancewithparagraphs50–onestimatingvariableconsiderationandparagraphs56–58onconstrainingestimatesofvariableconsideration.
20
Anentityshallaccountforacontractmodificationasaseparatecontractifbothofthefollowingconditionsarepresent:(a)
thescopeofthecontractincreasesbecauseoftheadditionofpromisedgoodsorservicesthataredistinct(inaccordancewithparagraphs26–30);and
thepriceofthecontractincreasesbyanamountofconsiderationthatreflectstheentity’sstand-alonesellingpricesoftheadditionalpromisedgoodsorservicesandanyappropriateadjustmentstothatpricetoreflectthecircumstancesoftheparticularcontract.Forexample,anentitymayadjustthestand-alonesellingpriceofanadditionalgoodorserviceforadiscountthatthecustomerreceives,becauseitisnotnecessaryfortheentitytoincurtheselling-relatedcoststhatitwouldincurwhensellingasimilargoodorservicetoanewcustomer.
(b)
21
Ifacontractmodificationisnotaccountedforasaseparatecontractinaccordancewithparagraph20,anentityshallaccountforthepromisedgoodsorservicesnotyettransferredatthedateofthecontractmodification(ietheremainingpromisedgoodsorservices)inwhicheverofthefollowingwaysisapplicable:(a)
Anentityshallaccountforthecontractmodificationasifitwereaterminationoftheexistingcontractandthecreationofanewcontract,iftheremaininggoodsorservicesaredistinctfromthegoodsorservicestransferredonorbeforethedateofthecontractmodification.Theamountofconsiderationtobeallocatedtotheremainingperformanceobligations(ortotheremainingdistinctgoodsorservicesinasingleperformanceobligationidentifiedinaccordancewithparagraph22(b))isthesumof:(i)
theconsiderationpromisedbythecustomer(includingamountsalreadyreceivedfromthecustomer)thatwasincludedintheestimateofthetransactionpriceandthathadnotbeenrecognisedasrevenue;and
theconsiderationpromisedaspartofthecontractmodification.
(ii)
(b)
Anentityshallaccountforthecontractmodificationasifitwereapartoftheexistingcontractiftheremaininggoodsorservicesarenotdistinctand,therefore,formpartofasingleperformanceobligationthatispartiallysatisfiedatthedateofthecontractmodification.Theeffectthatthecontractmodificationhasonthetransactionprice,andontheentity’smeasureofprogresstowardscompletesatisfactionoftheperformanceobligation,isrecognisedasanadjustmenttorevenue
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(eitherasanincreaseinorareductionofrevenue)atthedateofthecontractmodification(ietheadjustmenttorevenueismadeonacumulativecatch-upbasis).
(c)
Iftheremaininggoodsorservicesareacombinationofitems(a)and(b),thentheentityshallaccountfortheeffectsofthemodificationontheunsatisfied(includingpartiallyunsatisfied)performanceobligationsinthemodifiedcontractinamannerthatisconsistentwiththeobjectivesofthisparagraph.
Identifyingperformanceobligations
22
Atcontractinception,anentityshallassessthegoodsorservicespromisedinacontractwithacustomerandshallidentifyasaperformanceobligationeachpromisetotransfertothecustomereither:(a)(b)
agoodorservice(orabundleofgoodsorservices)thatisdistinct;or
aseriesofdistinctgoodsorservicesthataresubstantiallythesameandthathavethesamepatternoftransfertothecustomer(seeparagraph23).
23
Aseriesofdistinctgoodsorserviceshasthesamepatternoftransfertothecustomerifbothofthefollowingcriteriaaremet:(a)
eachdistinctgoodorserviceintheseriesthattheentitypromisestotransfertothecustomerwouldmeetthecriteriainparagraph35tobeaperformanceobligationsatisfiedovertime;and
inaccordancewithparagraphs39–40,thesamemethodwouldbeusedtomeasuretheentity’sprogresstowardscompletesatisfactionoftheperformanceobligationtotransfereachdistinctgoodorserviceintheseriestothecustomer.
(b)
Promisesincontractswithcustomers
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Acontractwithacustomergenerallyexplicitlystatesthegoodsorservicesthatanentitypromisestotransfertoacustomer.However,theperformanceobligationsidentifiedinacontractwithacustomermaynotbelimitedtothegoodsorservicesthatareexplicitlystatedinthatcontract.Thisisbecauseacontractwithacustomermayalsoincludepromisesthatareimpliedbyanentity’scustomarybusinesspractices,publishedpoliciesorspecificstatementsif,atthetimeofenteringintothecontract,thosepromisescreateavalidexpectationofthecustomerthattheentitywilltransferagoodorservicetothecustomer.
Performanceobligationsdonotincludeactivitiesthatanentitymustundertaketofulfilacontractunlessthoseactivitiestransferagoodorservicetoacustomer.Forexample,aservicesprovidermayneedtoperformvariousadministrativetaskstosetupacontract.Theperformanceofthosetasksdoesnottransferaservicetothecustomerasthetasksareperformed.Therefore,thosesetupactivitiesarenotaperformanceobligation.
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Distinctgoodsorservices
26
Dependingonthecontract,promisedgoodsorservicesmayinclude,butarenotlimitedto,thefollowing:(a)(b)(c)
saleofgoodsproducedbyanentity(forexample,inventoryofamanufacturer);
resaleofgoodspurchasedbyanentity(forexample,merchandiseofaretailer);
resaleofrightstogoodsorservicespurchasedbyanentity(forexample,aticketresoldbyanentityactingasaprincipal,asdescribedinparagraphsB34–B38);
performingacontractuallyagreed-upontask(ortasks)foracustomer;providingaserviceofstandingreadytoprovidegoodsorservices(forexample,unspecifiedupdatestosoftwarethatareprovidedonawhen-and-if-availablebasis)orofmakinggoodsorservicesavailableforacustomertouseasandwhenthecustomerdecides;
providingaserviceofarrangingforanotherpartytotransfergoodsorservicestoacustomer(forexample,actingasanagentofanotherparty,asdescribedinparagraphsB34–B38);
grantingrightstogoodsorservicestobeprovidedinthefuturethatacustomercanresellorprovidetoitscustomer(forexample,anentitysellingaproducttoaretailerpromisestotransferanadditionalgoodorservicetoanindividualwhopurchasestheproductfromtheretailer);constructing,manufacturingordevelopinganassetonbehalfofacustomer;
grantinglicences(seeparagraphsB52–B63B);and
grantingoptionstopurchaseadditionalgoodsorservices(whenthoseoptionsprovideacustomerwithamaterialright,asdescribedinparagraphsB39–B43).
(d)(e)
(f)
(g)
(h)(i)(j)
27
Agoodorservicethatispromisedtoacustomerisdistinctifbothofthefollowingcriteriaaremet:(a)
thecustomercanbenefitfromthegoodorserviceeitheronitsownortogetherwithotherresourcesthatarereadilyavailabletothecustomer(iethegoodorserviceiscapableofbeingdistinct);and
theentity’spromisetotransferthegoodorservicetothecustomerisseparatelyidentifiablefromotherpromisesinthecontract(iethepromisetotransferthegoodorserviceisdistinctwithinthecontextofthecontract).
(b)
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Acustomercanbenefitfromagoodorserviceinaccordancewithparagraph27(a)ifthegoodorservicecouldbeused,consumed,soldforanamountthatisgreaterthanscrapvalueorotherwiseheldinawaythatgenerateseconomicbenefits.Forsomegoodsorservices,acustomermaybeabletobenefitfromagoodorserviceonitsown.Forothergoodsorservices,acustomermaybeabletobenefitfromthegoodorserviceonlyinconjunction
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withotherreadilyavailableresources.Areadilyavailableresourceisagoodorservicethatissoldseparately(bytheentityoranotherentity)oraresourcethatthecustomerhasalreadyobtainedfromtheentity(includinggoodsorservicesthattheentitywillhavealreadytransferredtothecustomerunderthecontract)orfromothertransactionsorevents.Variousfactorsmayprovideevidencethatthecustomercanbenefitfromagoodorserviceeitheronitsownorinconjunctionwithotherreadilyavailableresources.Forexample,thefactthattheentityregularlysellsagoodorserviceseparatelywouldindicatethatacustomercanbenefitfromthegoodorserviceonitsownorwithotherreadilyavailableresources.
29
Inassessingwhetheranentity’spromisestotransfergoodsorservicestothecustomerareseparatelyidentifiableinaccordancewithparagraph27(b),theobjectiveistodeterminewhetherthenatureofthepromise,withinthecontextofthecontract,istotransfereachofthosegoodsorservicesindividuallyor,instead,totransferacombineditemoritemstowhichthepromisedgoodsorservicesareinputs.Factorsthatindicatethattwoormorepromisestotransfergoodsorservicestoacustomerarenotseparatelyidentifiableinclude,butarenotlimitedto,thefollowing:(a)
theentityprovidesasignificantserviceofintegratingthegoodsorserviceswithothergoodsorservicespromisedinthecontractintoabundleofgoodsorservicesthatrepresentthecombinedoutputoroutputsforwhichthecustomerhascontracted.Inotherwords,theentityisusingthegoodsorservicesasinputstoproduceordeliverthecombinedoutputoroutputsspecifiedbythecustomer.Acombinedoutputoroutputsmightincludemorethanonephase,elementorunit.oneormoreofthegoodsorservicessignificantlymodifiesorcustomises,oraresignificantlymodifiedorcustomisedby,oneormoreoftheothergoodsorservicespromisedinthecontract.
thegoodsorservicesarehighlyinterdependentorhighlyinterrelated.Inotherwords,eachofthegoodsorservicesissignificantlyaffectedbyoneormoreoftheothergoodsorservicesinthecontract.Forexample,insomecases,twoormoregoodsorservicesaresignificantlyaffectedbyeachotherbecausetheentitywouldnotbeabletofulfilitspromisebytransferringeachofthegoodsorservicesindependently.
(b)
(c)
30
Ifapromisedgoodorserviceisnotdistinct,anentityshallcombinethatgoodorservicewithotherpromisedgoodsorservicesuntilitidentifiesabundleofgoodsorservicesthatisdistinct.Insomecases,thatwouldresultintheentityaccountingforallthegoodsorservicespromisedinacontractasasingleperformanceobligation.
Satisfactionofperformanceobligations
31
Anentityshallrecogniserevenuewhen(oras)theentitysatisfiesaperformanceobligationbytransferringapromisedgoodorservice(ieanasset)toacustomer.Anassetistransferredwhen(oras)thecustomerobtainscontrolofthatasset.
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32
Foreachperformanceobligationidentifiedinaccordancewithparagraphs22–30,anentityshalldetermineatcontractinceptionwhetheritsatisfiestheperformanceobligationovertime(inaccordancewithparagraphs35–37)orsatisfiestheperformanceobligationatapointintime(inaccordancewithparagraph38).Ifanentitydoesnotsatisfyaperformanceobligationovertime,theperformanceobligationissatisfiedatapointintime.Goodsandservicesareassets,evenifonlymomentarily,whentheyarereceivedandused(asinthecaseofmanyservices).Controlofanassetreferstotheabilitytodirecttheuseof,andobtainsubstantiallyalloftheremainingbenefitsfrom,theasset.Controlincludestheabilitytopreventotherentitiesfromdirectingtheuseof,andobtainingthebenefitsfrom,anasset.Thebenefitsofanassetarethepotentialcashflows(inflowsorsavingsinoutflows)thatcanbeobtaineddirectlyorindirectlyinmanyways,suchasby:(a)(b)(c)(d)(e)(f)
34
usingtheassettoproducegoodsorprovideservices(includingpublicservices);
usingtheassettoenhancethevalueofotherassets;usingtheassettosettleliabilitiesorreduceexpenses;sellingorexchangingtheasset;pledgingtheassettosecurealoan;andholdingtheasset.
33
Whenevaluatingwhetheracustomerobtainscontrolofanasset,anentityshallconsideranyagreementtorepurchasetheasset(seeparagraphsB–B76).
Performanceobligationssatisfiedovertime
35
Anentitytransferscontrolofagoodorserviceovertimeand,therefore,satisfiesaperformanceobligationandrecognisesrevenueovertime,ifoneofthefollowingcriteriaismet:(a)
thecustomersimultaneouslyreceivesandconsumesthebenefitsprovidedbytheentity’sperformanceastheentityperforms(seeparagraphsB3–B4);
theentity’sperformancecreatesorenhancesanasset(forexample,workinprogress)thatthecustomercontrolsastheassetiscreatedorenhanced(seeparagraphB5);or
theentity’sperformancedoesnotcreateanassetwithanalternativeusetotheentity(seeparagraph36)andtheentityhasanenforceablerighttopaymentforperformancecompletedtodate(seeparagraph37).
(b)
(c)
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Anassetcreatedbyanentity’sperformancedoesnothaveanalternativeusetoanentityiftheentityiseitherrestrictedcontractuallyfromreadilydirectingtheassetforanotheruseduringthecreationorenhancementofthatassetorlimitedpracticallyfromreadilydirectingtheassetinitscompletedstateforanotheruse.Theassessmentofwhetheranassethasanalternativeusetotheentityismadeatcontractinception.Aftercontractinception,anentityshallnotupdatetheassessmentofthealternativeuseofanassetunlessthepartiestothecontractapproveacontractmodificationthatsubstantivelychangesthe
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performanceobligation.ParagraphsB6–B8provideguidanceforassessingwhetheranassethasanalternativeusetoanentity.
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Anentityshallconsiderthetermsofthecontract,aswellasanylawsthatapplytothecontract,whenevaluatingwhetherithasanenforceablerighttopaymentforperformancecompletedtodateinaccordancewithparagraph35(c).Therighttopaymentforperformancecompletedtodatedoesnotneedtobeforafixedamount.However,atalltimesthroughoutthedurationofthecontract,theentitymustbeentitledtoanamountthatatleastcompensatestheentityforperformancecompletedtodateifthecontractisterminatedbythecustomeroranotherpartyforreasonsotherthantheentity’sfailuretoperformaspromised.ParagraphsB9–B13provideguidanceforassessingtheexistenceandenforceabilityofarighttopaymentandwhetheranentity’srighttopaymentwouldentitletheentitytobepaidforitsperformancecompletedtodate.
Performanceobligationssatisfiedatapointintime
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Ifaperformanceobligationisnotsatisfiedovertimeinaccordancewithparagraphs35–37,anentitysatisfiestheperformanceobligationatapointintime.Todeterminethepointintimeatwhichacustomerobtainscontrolofapromisedassetandtheentitysatisfiesaperformanceobligation,theentityshallconsidertherequirementsforcontrolinparagraphs31–34.Inaddition,anentityshallconsiderindicatorsofthetransferofcontrol,whichinclude,butarenotlimitedto,thefollowing:(a)
Theentityhasapresentrighttopaymentfortheasset—ifacustomerispresentlyobligedtopayforanasset,thenthatmayindicatethatthecustomerhasobtainedtheabilitytodirecttheuseof,andobtainsubstantiallyalloftheremainingbenefitsfrom,theassetinexchange.Thecustomerhaslegaltitletotheasset—legaltitlemayindicatewhichpartytoacontracthastheabilitytodirecttheuseof,andobtainsubstantiallyalloftheremainingbenefitsfrom,anassetortorestricttheaccessofotherentitiestothosebenefits.Therefore,thetransferoflegaltitleofanassetmayindicatethatthecustomerhasobtainedcontroloftheasset.Ifanentityretainslegaltitlesolelyasprotectionagainstthecustomer’sfailuretopay,thoserightsoftheentitywouldnotprecludethecustomerfromobtainingcontrolofanasset.
Theentityhastransferredphysicalpossessionoftheasset—thecustomer’sphysicalpossessionofanassetmayindicatethatthecustomerhastheabilitytodirecttheuseof,andobtainsubstantiallyalloftheremainingbenefitsfrom,theassetortorestricttheaccessofotherentitiestothosebenefits.However,physicalpossessionmaynotcoincidewithcontrolofanasset.Forexample,insomerepurchaseagreementsandinsomeconsignmentarrangements,acustomerorconsigneemayhavephysicalpossessionofanassetthattheentitycontrols.Conversely,insomebill-and-holdarrangements,theentitymayhavephysicalpossessionofanassetthatthecustomercontrols.ParagraphsB–B76,B77–B78andB79–B82provideguidanceonaccountingforrepurchaseagreements,consignmentarrangementsandbill-and-holdarrangements,respectively.
(b)
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Thecustomerhasthesignificantrisksandrewardsofownershipoftheasset—thetransferofthesignificantrisksandrewardsofownershipofanassettothecustomermayindicatethatthecustomerhasobtainedtheabilitytodirecttheuseof,andobtainsubstantiallyalloftheremainingbenefitsfrom,theasset.However,whenevaluatingtherisksandrewardsofownershipofapromisedasset,anentityshallexcludeanyrisksthatgiverisetoaseparateperformanceobligationinadditiontotheperformanceobligationtotransfertheasset.Forexample,anentitymayhavetransferredcontrolofanassettoacustomerbutnotyetsatisfiedanadditionalperformanceobligationtoprovidemaintenanceservicesrelatedtothetransferredasset.
Thecustomerhasacceptedtheasset—thecustomer’sacceptanceofanassetmayindicatethatithasobtainedtheabilitytodirecttheuseof,andobtainsubstantiallyalloftheremainingbenefitsfrom,theasset.Toevaluatetheeffectofacontractualcustomeracceptanceclauseonwhencontrolofanassetistransferred,anentityshallconsidertheguidanceinparagraphsB83–B86.
(e)
Measuringprogresstowardscompletesatisfactionofaperformanceobligation
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Foreachperformanceobligationsatisfiedovertimeinaccordancewithparagraphs35–37,anentityshallrecogniserevenueovertimebymeasuringtheprogresstowardscompletesatisfactionofthatperformanceobligation.Theobjectivewhenmeasuringprogressistodepictanentity’sperformanceintransferringcontrolofgoodsorservicespromisedtoacustomer(iethesatisfactionofanentity’sperformanceobligation).
Anentityshallapplyasinglemethodofmeasuringprogressforeachperformanceobligationsatisfiedovertimeandtheentityshallapplythatmethodconsistentlytosimilarperformanceobligationsandinsimilarcircumstances.Attheendofeachreportingperiod,anentityshallremeasureitsprogresstowardscompletesatisfactionofaperformanceobligationsatisfiedovertime.
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Methodsformeasuringprogress
41
Appropriatemethodsofmeasuringprogressincludeoutputmethodsandinputmethods.ParagraphsB14–B19provideguidanceforusingoutputmethodsandinputmethodstomeasureanentity’sprogresstowardscompletesatisfactionofaperformanceobligation.Indeterminingtheappropriatemethodformeasuringprogress,anentityshallconsiderthenatureofthegoodorservicethattheentitypromisedtotransfertothecustomer.
Whenapplyingamethodformeasuringprogress,anentityshallexcludefromthemeasureofprogressanygoodsorservicesforwhichtheentitydoesnottransfercontroltoacustomer.Conversely,anentityshallincludeinthemeasureofprogressanygoodsorservicesforwhichtheentitydoestransfercontroltoacustomerwhensatisfyingthatperformanceobligation.
Ascircumstanceschangeovertime,anentityshallupdateitsmeasureofprogresstoreflectanychangesintheoutcomeoftheperformanceobligation.
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Suchchangestoanentity’smeasureofprogressshallbeaccountedforasachangeinaccountingestimateinaccordancewithIAS8AccountingPolicies,ChangesinAccountingEstimatesandErrors.
Reasonablemeasuresofprogress
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Anentityshallrecogniserevenueforaperformanceobligationsatisfiedovertimeonlyiftheentitycanreasonablymeasureitsprogresstowardscompletesatisfactionoftheperformanceobligation.Anentitywouldnotbeabletoreasonablymeasureitsprogresstowardscompletesatisfactionofaperformanceobligationifitlacksreliableinformationthatwouldberequiredtoapplyanappropriatemethodofmeasuringprogress.
Insomecircumstances(forexample,intheearlystagesofacontract),anentitymaynotbeabletoreasonablymeasuretheoutcomeofaperformanceobligation,buttheentityexpectstorecoverthecostsincurredinsatisfyingtheperformanceobligation.Inthosecircumstances,theentityshallrecogniserevenueonlytotheextentofthecostsincurreduntilsuchtimethatitcanreasonablymeasuretheoutcomeoftheperformanceobligation.
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Measurement
46
When(oras)aperformanceobligationissatisfied,anentityshallrecogniseasrevenuetheamountofthetransactionprice(whichexcludesestimatesofvariableconsiderationthatareconstrainedinaccordancewithparagraphs56–58)thatisallocatedtothatperformanceobligation.
Determiningthetransactionprice
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Anentityshallconsiderthetermsofthecontractanditscustomarybusinesspracticestodeterminethetransactionprice.Thetransactionpriceistheamountofconsiderationtowhichanentityexpectstobeentitledinexchangefortransferringpromisedgoodsorservicestoacustomer,excludingamountscollectedonbehalfofthirdparties(forexample,somesalestaxes).Theconsiderationpromisedinacontractwithacustomermayincludefixedamounts,variableamounts,orboth.Thenature,timingandamountofconsiderationpromisedbyacustomeraffecttheestimateofthetransactionprice.Whendeterminingthetransactionprice,anentityshallconsidertheeffectsofallofthefollowing:(a)(b)(c)(d)(e)
variableconsideration(seeparagraphs50–55and59);
constrainingestimatesofvariableconsideration(seeparagraphs56–58);theexistenceofasignificantfinancingcomponentinthecontract(seeparagraphs60–65);
non-cashconsideration(seeparagraphs66–69);andconsiderationpayabletoacustomer(seeparagraphs70–72).
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Forthepurposeofdeterminingthetransactionprice,anentityshallassumethatthegoodsorserviceswillbetransferredtothecustomeraspromisedinaccordancewiththeexistingcontractandthatthecontractwillnotbecancelled,renewedormodified.
Variableconsideration
50
Iftheconsiderationpromisedinacontractincludesavariableamount,anentityshallestimatetheamountofconsiderationtowhichtheentitywillbeentitledinexchangefortransferringthepromisedgoodsorservicestoacustomer.Anamountofconsiderationcanvarybecauseofdiscounts,rebates,refunds,credits,priceconcessions,incentives,performancebonuses,penaltiesorothersimilaritems.Thepromisedconsiderationcanalsovaryifanentity’sentitlementtotheconsiderationiscontingentontheoccurrenceornon-occurrenceofafutureevent.Forexample,anamountofconsiderationwouldbevariableifeitheraproductwassoldwitharightofreturnorafixedamountispromisedasaperformancebonusonachievementofaspecifiedmilestone.
Thevariabilityrelatingtotheconsiderationpromisedbyacustomermaybeexplicitlystatedinthecontract.Inadditiontothetermsofthecontract,thepromisedconsiderationisvariableifeitherofthefollowingcircumstancesexists:(a)
thecustomerhasavalidexpectationarisingfromanentity’scustomarybusinesspractices,publishedpoliciesorspecificstatementsthattheentitywillacceptanamountofconsiderationthatislessthanthepricestatedinthecontract.Thatis,itisexpectedthattheentitywillofferapriceconcession.Dependingonthejurisdiction,industryorcustomerthisoffermaybereferredtoasadiscount,rebate,refundorcredit.otherfactsandcircumstancesindicatethattheentity’sintention,whenenteringintothecontractwiththecustomer,istoofferapriceconcessiontothecustomer.
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(b)
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Anentityshallestimateanamountofvariableconsiderationbyusingeitherofthefollowingmethods,dependingonwhichmethodtheentityexpectstobetterpredicttheamountofconsiderationtowhichitwillbeentitled:(a)
Theexpectedvalue—theexpectedvalueisthesumofprobability-weightedamountsinarangeofpossibleconsiderationamounts.Anexpectedvaluemaybeanappropriateestimateoftheamountofvariableconsiderationifanentityhasalargenumberofcontractswithsimilarcharacteristics.
Themostlikelyamount—themostlikelyamountisthesinglemostlikelyamountinarangeofpossibleconsiderationamounts(iethesinglemostlikelyoutcomeofthecontract).Themostlikelyamountmaybeanappropriateestimateoftheamountofvariableconsiderationifthecontracthasonlytwopossibleoutcomes(forexample,anentityeitherachievesaperformancebonusordoesnot).
(b)
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Anentityshallapplyonemethodconsistentlythroughoutthecontractwhenestimatingtheeffectofanuncertaintyonanamountofvariableconsiderationtowhichtheentitywillbeentitled.Inaddition,anentityshallconsideralltheinformation(historical,currentandforecast)thatisreasonablyavailabletotheentityandshallidentifyareasonablenumberofpossibleconsiderationamounts.Theinformationthatanentityusestoestimatetheamountofvariableconsiderationwouldtypicallybesimilartotheinformationthattheentity’smanagementusesduringthebid-and-proposalprocessandinestablishingpricesforpromisedgoodsorservices.
Refundliabilities
55
Anentityshallrecognisearefundliabilityiftheentityreceivesconsiderationfromacustomerandexpectstorefundsomeorallofthatconsiderationtothecustomer.Arefundliabilityismeasuredattheamountofconsiderationreceived(orreceivable)forwhichtheentitydoesnotexpecttobeentitled(ieamountsnotincludedinthetransactionprice).Therefundliability(andcorrespondingchangeinthetransactionpriceand,therefore,thecontractliability)shallbeupdatedattheendofeachreportingperiodforchangesincircumstances.Toaccountforarefundliabilityrelatingtoasalewitharightofreturn,anentityshallapplytheguidanceinparagraphsB20–B27.
Constrainingestimatesofvariableconsideration
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Anentityshallincludeinthetransactionpricesomeorallofanamountofvariableconsiderationestimatedinaccordancewithparagraph53onlytotheextentthatitishighlyprobablethatasignificantreversalintheamountofcumulativerevenuerecognisedwillnotoccurwhentheuncertaintyassociatedwiththevariableconsiderationissubsequentlyresolved.
Inassessingwhetheritishighlyprobablethatasignificantreversalintheamountofcumulativerevenuerecognisedwillnotoccuroncetheuncertaintyrelatedtothevariableconsiderationissubsequentlyresolved,anentityshallconsiderboththelikelihoodandthemagnitudeoftherevenuereversal.Factorsthatcouldincreasethelikelihoodorthemagnitudeofarevenuereversalinclude,butarenotlimitedto,anyofthefollowing:(a)
theamountofconsiderationishighlysusceptibletofactorsoutsidetheentity’sinfluence.Thosefactorsmayincludevolatilityinamarket,thejudgementoractionsofthirdparties,weatherconditionsandahighriskofobsolescenceofthepromisedgoodorservice.
theuncertaintyabouttheamountofconsiderationisnotexpectedtoberesolvedforalongperiodoftime.
theentity’sexperience(orotherevidence)withsimilartypesofcontractsislimited,orthatexperience(orotherevidence)haslimitedpredictivevalue.
theentityhasapracticeofeitherofferingabroadrangeofpriceconcessionsorchangingthepaymenttermsandconditionsofsimilarcontractsinsimilarcircumstances.
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(b)(c)
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(e)
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thecontracthasalargenumberandbroadrangeofpossibleconsiderationamounts.
AnentityshallapplyparagraphB63toaccountforconsiderationintheformofasales-basedorusage-basedroyaltythatispromisedinexchangeforalicenceofintellectualproperty.
Reassessmentofvariableconsideration
59
Attheendofeachreportingperiod,anentityshallupdatetheestimatedtransactionprice(includingupdatingitsassessmentofwhetheranestimateofvariableconsiderationisconstrained)torepresentfaithfullythecircumstancespresentattheendofthereportingperiodandthechangesincircumstancesduringthereportingperiod.Theentityshallaccountforchangesinthetransactionpriceinaccordancewithparagraphs87–90.
Theexistenceofasignificantfinancingcomponentinthecontract
60
Indeterminingthetransactionprice,anentityshalladjustthepromisedamountofconsiderationfortheeffectsofthetimevalueofmoneyifthetimingofpaymentsagreedtobythepartiestothecontract(eitherexplicitlyorimplicitly)providesthecustomerortheentitywithasignificantbenefitoffinancingthetransferofgoodsorservicestothecustomer.Inthosecircumstances,thecontractcontainsasignificantfinancingcomponent.Asignificantfinancingcomponentmayexistregardlessofwhetherthepromiseoffinancingisexplicitlystatedinthecontractorimpliedbythepaymenttermsagreedtobythepartiestothecontract.
Theobjectivewhenadjustingthepromisedamountofconsiderationforasignificantfinancingcomponentisforanentitytorecogniserevenueatanamountthatreflectsthepricethatacustomerwouldhavepaidforthepromisedgoodsorservicesifthecustomerhadpaidcashforthosegoodsorserviceswhen(oras)theytransfertothecustomer(iethecashsellingprice).Anentityshallconsiderallrelevantfactsandcircumstancesinassessingwhetheracontractcontainsafinancingcomponentandwhetherthatfinancingcomponentissignificanttothecontract,includingbothofthefollowing:(a)(b)
thedifference,ifany,betweentheamountofpromisedconsiderationandthecashsellingpriceofthepromisedgoodsorservices;andthecombinedeffectofbothofthefollowing:(i)
theexpectedlengthoftimebetweenwhentheentitytransfersthepromisedgoodsorservicestothecustomerandwhenthecustomerpaysforthosegoodsorservices;andtheprevailinginterestratesintherelevantmarket.
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(ii)
62
Notwithstandingtheassessmentinparagraph61,acontractwithacustomerwouldnothaveasignificantfinancingcomponentifanyofthefollowingfactorsexist:(a)
thecustomerpaidforthegoodsorservicesinadvanceandthetimingofthetransferofthosegoodsorservicesisatthediscretionofthecustomer.
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(b)
asubstantialamountoftheconsiderationpromisedbythecustomerisvariableandtheamountortimingofthatconsiderationvariesonthebasisoftheoccurrenceornon-occurrenceofafutureeventthatisnotsubstantiallywithinthecontrolofthecustomerortheentity(forexample,iftheconsiderationisasales-basedroyalty).
thedifferencebetweenthepromisedconsiderationandthecashsellingpriceofthegoodorservice(asdescribedinparagraph61)arisesforreasonsotherthantheprovisionoffinancetoeitherthecustomerortheentity,andthedifferencebetweenthoseamountsisproportionaltothereasonforthedifference.Forexample,thepaymenttermsmightprovidetheentityorthecustomerwithprotectionfromtheotherpartyfailingtoadequatelycompletesomeorallofitsobligationsunderthecontract.
(c)
63
Asapracticalexpedient,anentityneednotadjustthepromisedamountofconsiderationfortheeffectsofasignificantfinancingcomponentiftheentityexpects,atcontractinception,thattheperiodbetweenwhentheentitytransfersapromisedgoodorservicetoacustomerandwhenthecustomerpaysforthatgoodorservicewillbeoneyearorless.
Tomeettheobjectiveinparagraph61whenadjustingthepromisedamountofconsiderationforasignificantfinancingcomponent,anentityshallusethediscountratethatwouldbereflectedinaseparatefinancingtransactionbetweentheentityanditscustomeratcontractinception.Thatratewouldreflectthecreditcharacteristicsofthepartyreceivingfinancinginthecontract,aswellasanycollateralorsecurityprovidedbythecustomerortheentity,includingassetstransferredinthecontract.Anentitymaybeabletodeterminethatratebyidentifyingtheratethatdiscountsthenominalamountofthepromisedconsiderationtothepricethatthecustomerwouldpayincashforthegoodsorserviceswhen(oras)theytransfertothecustomer.Aftercontractinception,anentityshallnotupdatethediscountrateforchangesininterestratesorothercircumstances(suchasachangeintheassessmentofthecustomer’screditrisk).
Anentityshallpresenttheeffectsoffinancing(interestrevenueorinterestexpense)separatelyfromrevenuefromcontractswithcustomersinthestatementofcomprehensiveincome.Interestrevenueorinterestexpenseisrecognisedonlytotheextentthatacontractasset(orreceivable)oracontractliabilityisrecognisedinaccountingforacontractwithacustomer.
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Non-cashconsideration
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Todeterminethetransactionpriceforcontractsinwhichacustomerpromisesconsiderationinaformotherthancash,anentityshallmeasurethenon-cashconsideration(orpromiseofnon-cashconsideration)atfairvalue.
Ifanentitycannotreasonablyestimatethefairvalueofthenon-cashconsideration,theentityshallmeasuretheconsiderationindirectlybyreferencetothestand-alonesellingpriceofthegoodsorservicespromisedtothecustomer(orclassofcustomer)inexchangefortheconsideration.
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Thefairvalueofthenon-cashconsiderationmayvarybecauseoftheformoftheconsideration(forexample,achangeinthepriceofasharetowhichanentityisentitledtoreceivefromacustomer).Ifthefairvalueofthenon-cashconsiderationpromisedbyacustomervariesforreasonsotherthanonlytheformoftheconsideration(forexample,thefairvaluecouldvarybecauseoftheentity’sperformance),anentityshallapplytherequirementsinparagraphs56–58.
Ifacustomercontributesgoodsorservices(forexample,materials,equipmentorlabour)tofacilitateanentity’sfulfilmentofthecontract,theentityshallassesswhetheritobtainscontrolofthosecontributedgoodsorservices.Ifso,theentityshallaccountforthecontributedgoodsorservicesasnon-cashconsiderationreceivedfromthecustomer.
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Considerationpayabletoacustomer
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Considerationpayabletoacustomerincludescashamountsthatanentitypays,orexpectstopay,tothecustomer(ortootherpartiesthatpurchasetheentity’sgoodsorservicesfromthecustomer).Considerationpayabletoacustomeralsoincludescreditorotheritems(forexample,acouponorvoucher)thatcanbeappliedagainstamountsowedtotheentity(ortootherpartiesthatpurchasetheentity’sgoodsorservicesfromthecustomer).Anentityshallaccountforconsiderationpayabletoacustomerasareductionofthetransactionpriceand,therefore,ofrevenueunlessthepaymenttothecustomerisinexchangeforadistinctgoodorservice(asdescribedinparagraphs26–30)thatthecustomertransferstotheentity.Iftheconsiderationpayabletoacustomerincludesavariableamount,anentityshallestimatethetransactionprice(includingassessingwhethertheestimateofvariableconsiderationisconstrained)inaccordancewithparagraphs50–58.
Ifconsiderationpayabletoacustomerisapaymentforadistinctgoodorservicefromthecustomer,thenanentityshallaccountforthepurchaseofthegoodorserviceinthesamewaythatitaccountsforotherpurchasesfromsuppliers.Iftheamountofconsiderationpayabletothecustomerexceedsthefairvalueofthedistinctgoodorservicethattheentityreceivesfromthecustomer,thentheentityshallaccountforsuchanexcessasareductionofthetransactionprice.Iftheentitycannotreasonablyestimatethefairvalueofthegoodorservicereceivedfromthecustomer,itshallaccountforalloftheconsiderationpayabletothecustomerasareductionofthetransactionprice.
Accordingly,ifconsiderationpayabletoacustomerisaccountedforasareductionofthetransactionprice,anentityshallrecognisethereductionofrevenuewhen(oras)thelaterofeitherofthefollowingeventsoccurs:(a)(b)
theentityrecognisesrevenueforthetransferoftherelatedgoodsorservicestothecustomer;and
theentitypaysorpromisestopaytheconsideration(evenifthepaymentisconditionalonafutureevent).Thatpromisemightbeimpliedbytheentity’scustomarybusinesspractices.
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Allocatingthetransactionpricetoperformanceobligations
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Theobjectivewhenallocatingthetransactionpriceisforanentitytoallocatethetransactionpricetoeachperformanceobligation(ordistinctgoodorservice)inanamountthatdepictstheamountofconsiderationtowhichtheentityexpectstobeentitledinexchangefortransferringthepromisedgoodsorservicestothecustomer.
Tomeettheallocationobjective,anentityshallallocatethetransactionpricetoeachperformanceobligationidentifiedinthecontractonarelativestand-alonesellingpricebasisinaccordancewithparagraphs76–80,exceptasspecifiedinparagraphs81–83(forallocatingdiscounts)andparagraphs84–86(forallocatingconsiderationthatincludesvariableamounts).
Paragraphs76–86donotapplyifacontracthasonlyoneperformanceobligation.However,paragraphs84–86mayapplyifanentitypromisestotransferaseriesofdistinctgoodsorservicesidentifiedasasingleperformanceobligationinaccordancewithparagraph22(b)andthepromisedconsiderationincludesvariableamounts.
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Allocationbasedonstand-alonesellingprices
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Toallocatethetransactionpricetoeachperformanceobligationonarelativestand-alonesellingpricebasis,anentityshalldeterminethestand-alonesellingpriceatcontractinceptionofthedistinctgoodorserviceunderlyingeachperformanceobligationinthecontractandallocatethetransactionpriceinproportiontothosestand-alonesellingprices.
Thestand-alonesellingpriceisthepriceatwhichanentitywouldsellapromisedgoodorserviceseparatelytoacustomer.Thebestevidenceofastand-alonesellingpriceistheobservablepriceofagoodorservicewhentheentitysellsthatgoodorserviceseparatelyinsimilarcircumstancesandtosimilarcustomers.Acontractuallystatedpriceoralistpriceforagoodorservicemaybe(butshallnotbepresumedtobe)thestand-alonesellingpriceofthatgoodorservice.
Ifastand-alonesellingpriceisnotdirectlyobservable,anentityshallestimatethestand-alonesellingpriceatanamountthatwouldresultintheallocationofthetransactionpricemeetingtheallocationobjectiveinparagraph73.Whenestimatingastand-alonesellingprice,anentityshallconsiderallinformation(includingmarketconditions,entity-specificfactorsandinformationaboutthecustomerorclassofcustomer)thatisreasonablyavailabletotheentity.Indoingso,anentityshallmaximisetheuseofobservableinputsandapplyestimationmethodsconsistentlyinsimilarcircumstances.
Suitablemethodsforestimatingthestand-alonesellingpriceofagoodorserviceinclude,butarenotlimitedto,thefollowing:(a)
Adjustedmarketassessmentapproach—anentitycouldevaluatethemarketinwhichitsellsgoodsorservicesandestimatethepricethatacustomerinthatmarketwouldbewillingtopayforthosegoodsorservices.Thatapproachmightalsoincludereferringtopricesfromthe
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entity’scompetitorsforsimilargoodsorservicesandadjustingthosepricesasnecessarytoreflecttheentity’scostsandmargins.
(b)
Expectedcostplusamarginapproach—anentitycouldforecastitsexpectedcostsofsatisfyingaperformanceobligationandthenaddanappropriatemarginforthatgoodorservice.
Residualapproach—anentitymayestimatethestand-alonesellingpricebyreferencetothetotaltransactionpricelessthesumoftheobservablestand-alonesellingpricesofothergoodsorservicespromisedinthecontract.However,anentitymayusearesidualapproachtoestimate,inaccordancewithparagraph78,thestand-alonesellingpriceofagoodorserviceonlyifoneofthefollowingcriteriaismet:(i)
theentitysellsthesamegoodorservicetodifferentcustomers(atornearthesametime)forabroadrangeofamounts(iethesellingpriceishighlyvariablebecausearepresentativestand-alonesellingpriceisnotdiscerniblefrompasttransactionsorotherobservableevidence);or
theentityhasnotyetestablishedapriceforthatgoodorserviceandthegoodorservicehasnotpreviouslybeensoldonastand-alonebasis(iethesellingpriceisuncertain).
(c)
(ii)
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Acombinationofmethodsmayneedtobeusedtoestimatethestand-alonesellingpricesofthegoodsorservicespromisedinthecontractiftwoormoreofthosegoodsorserviceshavehighlyvariableoruncertainstand-alonesellingprices.Forexample,anentitymayusearesidualapproachtoestimatetheaggregatestand-alonesellingpriceforthosepromisedgoodsorserviceswithhighlyvariableoruncertainstand-alonesellingpricesandthenuseanothermethodtoestimatethestand-alonesellingpricesoftheindividualgoodsorservicesrelativetothatestimatedaggregatestand-alonesellingpricedeterminedbytheresidualapproach.Whenanentityusesacombinationofmethodstoestimatethestand-alonesellingpriceofeachpromisedgoodorserviceinthecontract,theentityshallevaluatewhetherallocatingthetransactionpriceatthoseestimatedstand-alonesellingpriceswouldbeconsistentwiththeallocationobjectiveinparagraph73andtherequirementsforestimatingstand-alonesellingpricesinparagraph78.
Allocationofadiscount
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Acustomerreceivesadiscountforpurchasingabundleofgoodsorservicesifthesumofthestand-alonesellingpricesofthosepromisedgoodsorservicesinthecontractexceedsthepromisedconsiderationinacontract.Exceptwhenanentityhasobservableevidenceinaccordancewithparagraph82thattheentirediscountrelatestoonlyoneormore,butnotall,performanceobligationsinacontract,theentityshallallocateadiscountproportionatelytoallperformanceobligationsinthecontract.Theproportionateallocationofthediscountinthosecircumstancesisaconsequenceoftheentityallocatingthetransactionpricetoeachperformanceobligationonthebasisoftherelativestand-alonesellingpricesoftheunderlyingdistinctgoodsorservices.
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82
Anentityshallallocateadiscountentirelytooneormore,butnotall,performanceobligationsinthecontractifallofthefollowingcriteriaaremet:(a)(b)
theentityregularlysellseachdistinctgoodorservice(oreachbundleofdistinctgoodsorservices)inthecontractonastand-alonebasis;theentityalsoregularlysellsonastand-alonebasisabundle(orbundles)ofsomeofthosedistinctgoodsorservicesatadiscounttothestand-alonesellingpricesofthegoodsorservicesineachbundle;andthediscountattributabletoeachbundleofgoodsorservicesdescribedinparagraph82(b)issubstantiallythesameasthediscountinthecontractandananalysisofthegoodsorservicesineachbundleprovidesobservableevidenceoftheperformanceobligation(orperformanceobligations)towhichtheentirediscountinthecontractbelongs.
(c)
83
Ifadiscountisallocatedentirelytooneormoreperformanceobligationsinthecontractinaccordancewithparagraph82,anentityshallallocatethediscountbeforeusingtheresidualapproachtoestimatethestand-alonesellingpriceofagoodorserviceinaccordancewithparagraph79(c).
Allocationofvariableconsideration
84
Variableconsiderationthatispromisedinacontractmaybeattributabletotheentirecontractortoaspecificpartofthecontract,suchaseitherofthefollowing:(a)
oneormore,butnotall,performanceobligationsinthecontract(forexample,abonusmaybecontingentonanentitytransferringapromisedgoodorservicewithinaspecifiedperiodoftime);or
oneormore,butnotall,distinctgoodsorservicespromisedinaseriesofdistinctgoodsorservicesthatformspartofasingleperformanceobligationinaccordancewithparagraph22(b)(forexample,theconsiderationpromisedforthesecondyearofatwo-yearcleaningservicecontractwillincreaseonthebasisofmovementsinaspecifiedinflationindex).
(b)
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Anentityshallallocateavariableamount(andsubsequentchangestothatamount)entirelytoaperformanceobligationortoadistinctgoodorservicethatformspartofasingleperformanceobligationinaccordancewithparagraph22(b)ifbothofthefollowingcriteriaaremet:(a)
thetermsofavariablepaymentrelatespecificallytotheentity’seffortstosatisfytheperformanceobligationortransferthedistinctgoodorservice(ortoaspecificoutcomefromsatisfyingtheperformanceobligationortransferringthedistinctgoodorservice);and
allocatingthevariableamountofconsiderationentirelytotheperformanceobligationorthedistinctgoodorserviceisconsistentwiththeallocationobjectiveinparagraph73whenconsideringalloftheperformanceobligationsandpaymenttermsinthecontract.
(b)
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Theallocationrequirementsinparagraphs73–83shallbeappliedtoallocatetheremainingamountofthetransactionpricethatdoesnotmeetthecriteriainparagraph85.
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Changesinthetransactionprice
87
Aftercontractinception,thetransactionpricecanchangeforvariousreasons,includingtheresolutionofuncertaineventsorotherchangesincircumstancesthatchangetheamountofconsiderationtowhichanentityexpectstobeentitledinexchangeforthepromisedgoodsorservices.
Anentityshallallocatetotheperformanceobligationsinthecontractanysubsequentchangesinthetransactionpriceonthesamebasisasatcontractinception.Consequently,anentityshallnotreallocatethetransactionpricetoreflectchangesinstand-alonesellingpricesaftercontractinception.Amountsallocatedtoasatisfiedperformanceobligationshallberecognisedasrevenue,orasareductionofrevenue,intheperiodinwhichthetransactionpricechanges.Anentityshallallocateachangeinthetransactionpriceentirelytooneormore,butnotall,performanceobligationsordistinctgoodsorservicespromisedinaseriesthatformspartofasingleperformanceobligationinaccordancewithparagraph22(b)onlyifthecriteriainparagraph85onallocatingvariableconsiderationaremet.
Anentityshallaccountforachangeinthetransactionpricethatarisesasaresultofacontractmodificationinaccordancewithparagraphs18–21.However,forachangeinthetransactionpricethatoccursafteracontractmodification,anentityshallapplyparagraphs87–toallocatethechangeinthetransactionpriceinwhicheverofthefollowingwaysisapplicable:(a)
Anentityshallallocatethechangeinthetransactionpricetotheperformanceobligationsidentifiedinthecontractbeforethemodificationif,andtotheextentthat,thechangeinthetransactionpriceisattributabletoanamountofvariableconsiderationpromisedbeforethemodificationandthemodificationisaccountedforinaccordancewithparagraph21(a).
Inallothercasesinwhichthemodificationwasnotaccountedforasaseparatecontractinaccordancewithparagraph20,anentityshallallocatethechangeinthetransactionpricetotheperformanceobligationsinthemodifiedcontract(ietheperformanceobligationsthatwereunsatisfiedorpartiallyunsatisfiedimmediatelyafterthemodification).
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(b)
Contractcosts
Incrementalcostsofobtainingacontract
9192
Anentityshallrecogniseasanassettheincrementalcostsofobtainingacontractwithacustomeriftheentityexpectstorecoverthosecosts.Theincrementalcostsofobtainingacontractarethosecoststhatanentityincurstoobtainacontractwithacustomerthatitwouldnothaveincurredifthecontracthadnotbeenobtained(forexample,asalescommission).
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Coststoobtainacontractthatwouldhavebeenincurredregardlessofwhetherthecontractwasobtainedshallberecognisedasanexpensewhenincurred,unlessthosecostsareexplicitlychargeabletothecustomerregardlessofwhetherthecontractisobtained.
Asapracticalexpedient,anentitymayrecognisetheincrementalcostsofobtainingacontractasanexpensewhenincurrediftheamortisationperiodoftheassetthattheentityotherwisewouldhaverecognisedisoneyearorless.
94
Coststofulfilacontract
95
IfthecostsincurredinfulfillingacontractwithacustomerarenotwithinthescopeofanotherStandard(forexample,IAS2Inventories,IAS16Property,PlantandEquipmentorIAS38IntangibleAssets),anentityshallrecogniseanassetfromthecostsincurredtofulfilacontractonlyifthosecostsmeetallofthefollowingcriteria:(a)
thecostsrelatedirectlytoacontractortoananticipatedcontractthattheentitycanspecificallyidentify(forexample,costsrelatingtoservicestobeprovidedunderrenewalofanexistingcontractorcostsofdesigninganassettobetransferredunderaspecificcontractthathasnotyetbeenapproved);
thecostsgenerateorenhanceresourcesoftheentitythatwillbeusedinsatisfying(orincontinuingtosatisfy)performanceobligationsinthefuture;and
thecostsareexpectedtoberecovered.
(b)
(c)
96
ForcostsincurredinfulfillingacontractwithacustomerthatarewithinthescopeofanotherStandard,anentityshallaccountforthosecostsinaccordancewiththoseotherStandards.
Coststhatrelatedirectlytoacontract(oraspecificanticipatedcontract)includeanyofthefollowing:(a)(b)(c)
directlabour(forexample,salariesandwagesofemployeeswhoprovidethepromisedservicesdirectlytothecustomer);
directmaterials(forexample,suppliesusedinprovidingthepromisedservicestoacustomer);
allocationsofcoststhatrelatedirectlytothecontractortocontractactivities(forexample,costsofcontractmanagementandsupervision,insuranceanddepreciationoftools,equipmentandright-of-useassetsusedinfulfillingthecontract);
coststhatareexplicitlychargeabletothecustomerunderthecontract;and
othercoststhatareincurredonlybecauseanentityenteredintothecontract(forexample,paymentstosubcontractors).
97
(d)(e)
98
Anentityshallrecognisethefollowingcostsasexpenseswhenincurred:
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(a)
generalandadministrativecosts(unlessthosecostsareexplicitlychargeabletothecustomerunderthecontract,inwhichcaseanentityshallevaluatethosecostsinaccordancewithparagraph97);
costsofwastedmaterials,labourorotherresourcestofulfilthecontractthatwerenotreflectedinthepriceofthecontract;
coststhatrelatetosatisfiedperformanceobligations(orpartiallysatisfiedperformanceobligations)inthecontract(iecoststhatrelatetopastperformance);and
costsforwhichanentitycannotdistinguishwhetherthecostsrelatetounsatisfiedperformanceobligationsortosatisfiedperformanceobligations(orpartiallysatisfiedperformanceobligations).
(b)(c)
(d)
Amortisationandimpairment
99
Anassetrecognisedinaccordancewithparagraph91or95shallbeamortisedonasystematicbasisthatisconsistentwiththetransfertothecustomerofthegoodsorservicestowhichtheassetrelates.Theassetmayrelatetogoodsorservicestobetransferredunderaspecificanticipatedcontract(asdescribedinparagraph95(a)).
Anentityshallupdatetheamortisationtoreflectasignificantchangeintheentity’sexpectedtimingoftransfertothecustomerofthegoodsorservicestowhichtheassetrelates.SuchachangeshallbeaccountedforasachangeinaccountingestimateinaccordancewithIAS8.
Anentityshallrecogniseanimpairmentlossinprofitorlosstotheextentthatthecarryingamountofanassetrecognisedinaccordancewithparagraph91or95exceeds:(a)(b)
102
theremainingamountofconsiderationthattheentityexpectstoreceiveinexchangeforthegoodsorservicestowhichtheassetrelates;lessthecoststhatrelatedirectlytoprovidingthosegoodsorservicesandthathavenotbeenrecognisedasexpenses(seeparagraph97).
100
101
Forthepurposesofapplyingparagraph101todeterminetheamountofconsiderationthatanentityexpectstoreceive,anentityshallusetheprinciplesfordeterminingthetransactionprice(exceptfortherequirementsinparagraphs56–58onconstrainingestimatesofvariableconsideration)andadjustthatamounttoreflecttheeffectsofthecustomer’screditrisk.
Beforeanentityrecognisesanimpairmentlossforanassetrecognisedinaccordancewithparagraph91or95,theentityshallrecogniseanyimpairmentlossforassetsrelatedtothecontractthatarerecognisedinaccordancewithanotherStandard(forexample,IAS2,IAS16andIAS38).Afterapplyingtheimpairmenttestinparagraph101,anentityshallincludetheresultingcarryingamountoftheassetrecognisedinaccordancewithparagraph91or95inthecarryingamountofthecash-generatingunittowhichitbelongsforthepurposeofapplyingIAS36ImpairmentofAssetstothatcash-generatingunit.
Anentityshallrecogniseinprofitorlossareversalofsomeorallofanimpairmentlosspreviouslyrecognisedinaccordancewithparagraph101when
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theimpairmentconditionsnolongerexistorhaveimproved.Theincreasedcarryingamountoftheassetshallnotexceedtheamountthatwouldhavebeendetermined(netofamortisation)ifnoimpairmentlosshadbeenrecognisedpreviously.
Presentation
105
Wheneitherpartytoacontracthasperformed,anentityshallpresentthecontractinthestatementoffinancialpositionasacontractassetoracontractliability,dependingontherelationshipbetweentheentity’sperformanceandthecustomer’spayment.Anentityshallpresentanyunconditionalrightstoconsiderationseparatelyasareceivable.
Ifacustomerpaysconsideration,oranentityhasarighttoanamountofconsiderationthatisunconditional(ieareceivable),beforetheentitytransfersagoodorservicetothecustomer,theentityshallpresentthecontractasacontractliabilitywhenthepaymentismadeorthepaymentisdue(whicheverisearlier).Acontractliabilityisanentity’sobligationtotransfergoodsorservicestoacustomerforwhichtheentityhasreceivedconsideration(oranamountofconsiderationisdue)fromthecustomer.
Ifanentityperformsbytransferringgoodsorservicestoacustomerbeforethecustomerpaysconsiderationorbeforepaymentisdue,theentityshallpresentthecontractasacontractasset,excludinganyamountspresentedasareceivable.Acontractassetisanentity’srighttoconsiderationinexchangeforgoodsorservicesthattheentityhastransferredtoacustomer.AnentityshallassessacontractassetforimpairmentinaccordancewithIFRS9.Animpairmentofacontractassetshallbemeasured,presentedanddisclosedonthesamebasisasafinancialassetthatiswithinthescopeofIFRS9(seealsoparagraph113(b)).
Areceivableisanentity’srighttoconsiderationthatisunconditional.Arighttoconsiderationisunconditionalifonlythepassageoftimeisrequiredbeforepaymentofthatconsiderationisdue.Forexample,anentitywouldrecogniseareceivableifithasapresentrighttopaymenteventhoughthatamountmaybesubjecttorefundinthefuture.AnentityshallaccountforareceivableinaccordancewithIFRS9.Uponinitialrecognitionofareceivablefromacontractwithacustomer,anydifferencebetweenthemeasurementofthereceivableinaccordancewithIFRS9andthecorrespondingamountofrevenuerecognisedshallbepresentedasanexpense(forexample,asanimpairmentloss).
ThisStandardusestheterms‘contractasset’and‘contractliability’butdoesnotprohibitanentityfromusingalternativedescriptionsinthestatementoffinancialpositionforthoseitems.Ifanentityusesanalternativedescriptionforacontractasset,theentityshallprovidesufficientinformationforauserofthefinancialstatementstodistinguishbetweenreceivablesandcontractassets.
106
107
108
109
Disclosure
110
Theobjectiveofthedisclosurerequirementsisforanentitytodisclosesufficientinformationtoenableusersoffinancialstatementsto
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understandthenature,amount,timinganduncertaintyofrevenueandcashflowsarisingfromcontractswithcustomers.Toachievethatobjective,anentityshalldisclosequalitativeandquantitativeinformationaboutallofthefollowing:(a)(b)
itscontractswithcustomers(seeparagraphs113–122);
thesignificantjudgements,andchangesinthejudgements,madeinapplyingthisStandardtothosecontracts(seeparagraphs123–126);and
anyassetsrecognisedfromthecoststoobtainorfulfilacontractwithacustomerinaccordancewithparagraph91or95(seeparagraphs127–128).
(c)
111
Anentityshallconsiderthelevelofdetailnecessarytosatisfythedisclosureobjectiveandhowmuchemphasistoplaceoneachofthevariousrequirements.Anentityshallaggregateordisaggregatedisclosuressothatusefulinformationisnotobscuredbyeithertheinclusionofalargeamountofinsignificantdetailortheaggregationofitemsthathavesubstantiallydifferentcharacteristics.AnentityneednotdiscloseinformationinaccordancewiththisStandardifithasprovidedtheinformationinaccordancewithanotherStandard.
112
Contractswithcustomers
113
AnentityshalldiscloseallofthefollowingamountsforthereportingperiodunlessthoseamountsarepresentedseparatelyinthestatementofcomprehensiveincomeinaccordancewithotherStandards:(a)(b)
revenuerecognisedfromcontractswithcustomers,whichtheentityshalldiscloseseparatelyfromitsothersourcesofrevenue;and
anyimpairmentlossesrecognised(inaccordancewithIFRS9)onanyreceivablesorcontractassetsarisingfromanentity’scontractswithcustomers,whichtheentityshalldiscloseseparatelyfromimpairmentlossesfromothercontracts.
Disaggregationofrevenue
114
Anentityshalldisaggregaterevenuerecognisedfromcontractswithcustomersintocategoriesthatdepicthowthenature,amount,timinganduncertaintyofrevenueandcashflowsareaffectedbyeconomicfactors.AnentityshallapplytheguidanceinparagraphsB87–Bwhenselectingthecategoriestousetodisaggregaterevenue.
Inaddition,anentityshalldisclosesufficientinformationtoenableusersoffinancialstatementstounderstandtherelationshipbetweenthedisclosureofdisaggregatedrevenue(inaccordancewithparagraph114)andrevenueinformationthatisdisclosedforeachreportablesegment,iftheentityappliesIFRS8OperatingSegments.
115
Contractbalances
116
Anentityshalldiscloseallofthefollowing:
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(a)
theopeningandclosingbalancesofreceivables,contractassetsandcontractliabilitiesfromcontractswithcustomers,ifnototherwiseseparatelypresentedordisclosed;
revenuerecognisedinthereportingperiodthatwasincludedinthecontractliabilitybalanceatthebeginningoftheperiod;and
revenuerecognisedinthereportingperiodfromperformanceobligationssatisfied(orpartiallysatisfied)inpreviousperiods(forexample,changesintransactionprice).
(b)(c)
117
Anentityshallexplainhowthetimingofsatisfactionofitsperformanceobligations(seeparagraph119(a))relatestothetypicaltimingofpayment(seeparagraph119(b))andtheeffectthatthosefactorshaveonthecontractassetandthecontractliabilitybalances.Theexplanationprovidedmayusequalitativeinformation.
Anentityshallprovideanexplanationofthesignificantchangesinthecontractassetandthecontractliabilitybalancesduringthereportingperiod.Theexplanationshallincludequalitativeandquantitativeinformation.Examplesofchangesintheentity’sbalancesofcontractassetsandcontractliabilitiesincludeanyofthefollowing:(a)(b)
changesduetobusinesscombinations;
cumulativecatch-upadjustmentstorevenuethataffectthecorrespondingcontractassetorcontractliability,includingadjustmentsarisingfromachangeinthemeasureofprogress,achangeinanestimateofthetransactionprice(includinganychangesintheassessmentofwhetheranestimateofvariableconsiderationisconstrained)oracontractmodification;impairmentofacontractasset;
achangeinthetimeframeforarighttoconsiderationtobecomeunconditional(ieforacontractassettobereclassifiedtoareceivable);and
achangeinthetimeframeforaperformanceobligationtobesatisfied(iefortherecognitionofrevenuearisingfromacontractliability).
118
(c)(d)
(e)
Performanceobligations
119
Anentityshalldiscloseinformationaboutitsperformanceobligationsincontractswithcustomers,includingadescriptionofallofthefollowing:(a)
whentheentitytypicallysatisfiesitsperformanceobligations(forexample,uponshipment,upondelivery,asservicesarerenderedoruponcompletionofservice),includingwhenperformanceobligationsaresatisfiedinabill-and-holdarrangement;
thesignificantpaymentterms(forexample,whenpaymentistypicallydue,whetherthecontracthasasignificantfinancingcomponent,whethertheconsiderationamountisvariableandwhethertheestimateofvariableconsiderationistypicallyconstrainedinaccordancewithparagraphs56–58);
(b)
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(c)
thenatureofthegoodsorservicesthattheentityhaspromisedtotransfer,highlightinganyperformanceobligationstoarrangeforanotherpartytotransfergoodsorservices(ieiftheentityisactingasanagent);
obligationsforreturns,refundsandothersimilarobligations;andtypesofwarrantiesandrelatedobligations.
(d)(e)
Transactionpriceallocatedtotheremainingperformanceobligations
120
Anentityshalldisclosethefollowinginformationaboutitsremainingperformanceobligations:(a)
theaggregateamountofthetransactionpriceallocatedtotheperformanceobligationsthatareunsatisfied(orpartiallyunsatisfied)asoftheendofthereportingperiod;and
anexplanationofwhentheentityexpectstorecogniseasrevenuetheamountdisclosedinaccordancewithparagraph120(a),whichtheentityshalldiscloseineitherofthefollowingways:(i)
onaquantitativebasisusingthetimebandsthatwouldbemostappropriateforthedurationoftheremainingperformanceobligations;or
byusingqualitativeinformation.
(b)
(ii)
121
Asapracticalexpedient,anentityneednotdisclosetheinformationinparagraph120foraperformanceobligationifeitherofthefollowingconditionsismet:(a)(b)
theperformanceobligationispartofacontractthathasanoriginalexpecteddurationofoneyearorless;or
theentityrecognisesrevenuefromthesatisfactionoftheperformanceobligationinaccordancewithparagraphB16.
122
Anentityshallexplainqualitativelywhetheritisapplyingthepracticalexpedientinparagraph121andwhetheranyconsiderationfromcontractswithcustomersisnotincludedinthetransactionpriceand,therefore,notincludedintheinformationdisclosedinaccordancewithparagraph120.Forexample,anestimateofthetransactionpricewouldnotincludeanyestimatedamountsofvariableconsiderationthatareconstrained(seeparagraphs56–58).
SignificantjudgementsintheapplicationofthisStandard
123
Anentityshalldisclosethejudgements,andchangesinthejudgements,madeinapplyingthisStandardthatsignificantlyaffectthedeterminationoftheamountandtimingofrevenuefromcontractswithcustomers.Inparticular,anentityshallexplainthejudgements,andchangesinthejudgements,usedindeterminingbothofthefollowing:(a)
thetimingofsatisfactionparagraphs124–125);and
of
performance
obligations
(see
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(b)
thetransactionpriceandtheamountsallocatedtoperformanceobligations(seeparagraph126).
Determiningthetimingofsatisfactionofperformanceobligations
124
Forperformanceobligationsthatanentitysatisfiesovertime,anentityshalldisclosebothofthefollowing:(a)
themethodsusedtorecogniserevenue(forexample,adescriptionoftheoutputmethodsorinputmethodsusedandhowthosemethodsareapplied);and
anexplanationofwhythemethodsusedprovideafaithfuldepictionofthetransferofgoodsorservices.
(b)
125
Forperformanceobligationssatisfiedatapointintime,anentityshalldisclosethesignificantjudgementsmadeinevaluatingwhenacustomerobtainscontrolofpromisedgoodsorservices.
Determiningthetransactionpriceandtheamountsallocatedtoperformanceobligations
126
Anentityshalldiscloseinformationaboutthemethods,inputsandassumptionsusedforallofthefollowing:(a)
determiningthetransactionprice,whichincludes,butisnotlimitedto,estimatingvariableconsideration,adjustingtheconsiderationfortheeffectsofthetimevalueofmoneyandmeasuringnon-cashconsideration;
assessingwhetheranestimateofvariableconsiderationisconstrained;allocatingthetransactionprice,includingestimatingstand-alonesellingpricesofpromisedgoodsorservicesandallocatingdiscountsandvariableconsiderationtoaspecificpartofthecontract(ifapplicable);and
measuringobligationsforreturns,refundsandothersimilarobligations.
(b)(c)
(d)
Assetsrecognisedfromthecoststoobtainorfulfilacontractwithacustomer
127
Anentityshalldescribebothofthefollowing:(a)
thejudgementsmadeindeterminingtheamountofthecostsincurredtoobtainorfulfilacontractwithacustomer(inaccordancewithparagraph91or95);and
themethoditusestodeterminetheamortisationforeachreportingperiod.
(b)
128
Anentityshalldiscloseallofthefollowing:(a)
theclosingbalancesofassetsrecognisedfromthecostsincurredtoobtainorfulfilacontractwithacustomer(inaccordancewithparagraph91or95),bymaincategoryofasset(forexample,coststoobtaincontractswithcustomers,pre-contractcostsandsetupcosts);and
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(b)
theamountofamortisationandanyimpairmentlossesrecognisedinthereportingperiod.
Practicalexpedients
129
Ifanentityelectstousethepracticalexpedientineitherparagraph63(abouttheexistenceofasignificantfinancingcomponent)orparagraph94(abouttheincrementalcostsofobtainingacontract),theentityshalldisclosethatfact.
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AppendixADefinedterms
ThisappendixisanintegralpartoftheStandard.
contract
contractasset
contractliability
customer
income
performanceobligation
revenue
stand-alonesellingprice
(ofagoodorservice)transactionprice(foracontractwithacustomer)
A694Anagreementbetweentwoormorepartiesthatcreatesenforceablerightsandobligations.
Anentity’srighttoconsiderationinexchangeforgoodsorservicesthattheentityhastransferredtoacustomerwhenthatrightisconditionedonsomethingotherthanthepassageoftime(forexample,theentity’sfutureperformance).
Anentity’sobligationtotransfergoodsorservicestoacustomerforwhichtheentityhasreceivedconsideration(ortheamountisdue)fromthecustomer.
Apartythathascontractedwithanentitytoobtaingoodsorservicesthatareanoutputoftheentity’sordinaryactivitiesinexchangeforconsideration.
Increasesineconomicbenefitsduringtheaccountingperiodintheformofinflowsorenhancementsofassetsordecreasesofliabilitiesthatresultinanincreaseinequity,otherthanthoserelatingtocontributionsfromequityparticipants.
Apromiseinacontractwithacustomertotransfertothecustomereither:(a)agoodorservice(orabundleofgoodsorservices)thatisdistinct;or
(b)
aseriesofdistinctgoodsorservicesthataresubstantiallythesameandthathavethesamepatternoftransfertothecustomer.
Incomearisinginthecourseofanentity’sordinaryactivities.Thepriceatwhichanentitywouldsellapromisedgoodorserviceseparatelytoacustomer.
Theamountofconsiderationtowhichanentityexpectstobeentitledinexchangefortransferringpromisedgoodsorservicestoacustomer,excludingamountscollectedonbehalfofthirdparties.
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AppendixB
ApplicationGuidance
ThisappendixisanintegralpartoftheStandard.Itdescribestheapplicationofparagraphs1–129andhasthesameauthorityastheotherpartsoftheStandard.
B1
Thisapplicationguidanceisorganisedintothefollowingcategories:(a)(b)(c)(d)(e)(f)(g)(h)(i)(j)(k)(l)(m)(n)
performanceobligationssatisfiedovertime(paragraphsB2–B13);methodsformeasuringprogresstowardscompletesatisfactionofaperformanceobligation(paragraphsB14–B19);salewitharightofreturn(paragraphsB20–B27);warranties(paragraphsB28–B33);
principalversusagentconsiderations(paragraphsB34–B38);
customeroptionsforadditionalgoodsorservices(paragraphsB39–B43);customers’unexercisedrights(paragraphsB44–B47);non-refundableupfront(paragraphsB48–B51);
fees
(and
some
related
costs)
licensing(paragraphsB52–B63B);
repurchaseagreements(paragraphsB–B76);consignmentarrangements(paragraphsB77–B78);bill-and-holdarrangements(paragraphsB79–B82);customeracceptance(paragraphsB83–B86);and
disclosureofdisaggregatedrevenue(paragraphsB87–B).
Performanceobligationssatisfiedovertime
B2
Inaccordancewithparagraph35,aperformanceobligationissatisfiedovertimeifoneofthefollowingcriteriaismet:(a)
thecustomersimultaneouslyreceivesandconsumesthebenefitsprovidedbytheentity’sperformanceastheentityperforms(seeparagraphsB3–B4);
theentity’sperformancecreatesorenhancesanasset(forexample,workinprogress)thatthecustomercontrolsastheassetiscreatedorenhanced(seeparagraphB5);or
theentity’sperformancedoesnotcreateanassetwithanalternativeusetotheentity(seeparagraphsB6–B8)andtheentityhasanenforceablerighttopaymentforperformancecompletedtodate(seeparagraphsB9–B13).
(b)
(c)
Simultaneousreceiptandconsumptionofthebenefitsoftheentity’sperformance(paragraph35(a))
B3
Forsometypesofperformanceobligations,theassessmentofwhetheracustomerreceivesthebenefitsofanentity’sperformanceastheentityperforms
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andsimultaneouslyconsumesthosebenefitsastheyarereceivedwillbestraightforward.Examplesincluderoutineorrecurringservices(suchasacleaningservice)inwhichthereceiptandsimultaneousconsumptionbythecustomerofthebenefitsoftheentity’sperformancecanbereadilyidentified.
B4
Forothertypesofperformanceobligations,anentitymaynotbeabletoreadilyidentifywhetheracustomersimultaneouslyreceivesandconsumesthebenefitsfromtheentity’sperformanceastheentityperforms.Inthosecircumstances,aperformanceobligationissatisfiedovertimeifanentitydeterminesthatanotherentitywouldnotneedtosubstantiallyre-performtheworkthattheentityhascompletedtodateifthatotherentityweretofulfiltheremainingperformanceobligationtothecustomer.Indeterminingwhetheranotherentitywouldnotneedtosubstantiallyre-performtheworktheentityhascompletedtodate,anentityshallmakebothofthefollowingassumptions:(a)
disregardpotentialcontractualrestrictionsorpracticallimitationsthatotherwisewouldpreventtheentityfromtransferringtheremainingperformanceobligationtoanotherentity;and
presumethatanotherentityfulfillingtheremainderoftheperformanceobligationwouldnothavethebenefitofanyassetthatispresentlycontrolledbytheentityandthatwouldremaincontrolledbytheentityiftheperformanceobligationweretotransfertoanotherentity.
(b)
Customercontrolstheassetasitiscreatedorenhanced(paragraph35(b))
B5
Indeterminingwhetheracustomercontrolsanassetasitiscreatedorenhancedinaccordancewithparagraph35(b),anentityshallapplytherequirementsforcontrolinparagraphs31–34and38.Theassetthatisbeingcreatedorenhanced(forexample,awork-in-progressasset)couldbeeithertangibleorintangible.
Entity’sperformancedoesnotcreateanassetwithanalternativeuse(paragraph35(c))
B6
Inassessingwhetheranassethasanalternativeusetoanentityinaccordancewithparagraph36,anentityshallconsidertheeffectsofcontractualrestrictionsandpracticallimitationsontheentity’sabilitytoreadilydirectthatassetforanotheruse,suchassellingittoadifferentcustomer.Thepossibilityofthecontractwiththecustomerbeingterminatedisnotarelevantconsiderationinassessingwhethertheentitywouldbeabletoreadilydirecttheassetforanotheruse.
Acontractualrestrictiononanentity’sabilitytodirectanassetforanotherusemustbesubstantivefortheassetnottohaveanalternativeusetotheentity.Acontractualrestrictionissubstantiveifacustomercouldenforceitsrightstothepromisedassetiftheentitysoughttodirecttheassetforanotheruse.Incontrast,acontractualrestrictionisnotsubstantiveif,forexample,anassetislargelyinterchangeablewithotherassetsthattheentitycouldtransfertoanothercustomerwithoutbreachingthecontractandwithoutincurringsignificantcoststhatotherwisewouldnothavebeenincurredinrelationtothatcontract.
B7
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B8
Apracticallimitationonanentity’sabilitytodirectanassetforanotheruseexistsifanentitywouldincursignificanteconomiclossestodirecttheassetforanotheruse.Asignificanteconomiclosscouldarisebecausetheentityeitherwouldincursignificantcoststoreworktheassetorwouldonlybeabletoselltheassetatasignificantloss.Forexample,anentitymaybepracticallylimitedfromredirectingassetsthateitherhavedesignspecificationsthatareuniquetoacustomerorarelocatedinremoteareas.
Righttopaymentforperformancecompletedtodate(paragraph35(c))
B9
Inaccordancewithparagraph37,anentityhasarighttopaymentforperformancecompletedtodateiftheentitywouldbeentitledtoanamountthatatleastcompensatestheentityforitsperformancecompletedtodateintheeventthatthecustomeroranotherpartyterminatesthecontractforreasonsotherthantheentity’sfailuretoperformaspromised.Anamountthatwouldcompensateanentityforperformancecompletedtodatewouldbeanamountthatapproximatesthesellingpriceofthegoodsorservicestransferredtodate(forexample,recoveryofthecostsincurredbyanentityinsatisfyingtheperformanceobligationplusareasonableprofitmargin)ratherthancompensationforonlytheentity’spotentiallossofprofitifthecontractweretobeterminated.Compensationforareasonableprofitmarginneednotequaltheprofitmarginexpectedifthecontractwasfulfilledaspromised,butanentityshouldbeentitledtocompensationforeitherofthefollowingamounts:(a)
aproportionoftheexpectedprofitmargininthecontractthatreasonablyreflectstheextentoftheentity’sperformanceunderthecontractbeforeterminationbythecustomer(oranotherparty);orareasonablereturnontheentity’scostofcapitalforsimilarcontracts(ortheentity’stypicaloperatingmarginforsimilarcontracts)ifthecontract-specificmarginishigherthanthereturntheentityusuallygeneratesfromsimilarcontracts.
(b)
B10
Anentity’srighttopaymentforperformancecompletedtodateneednotbeapresentunconditionalrighttopayment.Inmanycases,anentitywillhaveanunconditionalrighttopaymentonlyatanagreed-uponmilestoneoruponcompletesatisfactionoftheperformanceobligation.Inassessingwhetherithasarighttopaymentforperformancecompletedtodate,anentityshallconsiderwhetheritwouldhaveanenforceablerighttodemandorretainpaymentforperformancecompletedtodateifthecontractweretobeterminatedbeforecompletionforreasonsotherthantheentity’sfailuretoperformaspromised.Insomecontracts,acustomermayhavearighttoterminatethecontractonlyatspecifiedtimesduringthelifeofthecontractorthecustomermightnothaveanyrighttoterminatethecontract.Ifacustomeractstoterminateacontractwithouthavingtherighttoterminatethecontractatthattime(includingwhenacustomerfailstoperformitsobligationsaspromised),thecontract(orotherlaws)mightentitletheentitytocontinuetotransfertothecustomerthegoodsorservicespromisedinthecontractandrequirethecustomertopaytheconsiderationpromisedinexchangeforthosegoodsorservices.Inthosecircumstances,anentityhasarighttopaymentforperformancecompletedto
B11
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datebecausetheentityhasarighttocontinuetoperformitsobligationsinaccordancewiththecontractandtorequirethecustomertoperformitsobligations(whichincludepayingthepromisedconsideration).
B12
Inassessingtheexistenceandenforceabilityofarighttopaymentforperformancecompletedtodate,anentityshallconsiderthecontractualtermsaswellasanylegislationorlegalprecedentthatcouldsupplementoroverridethosecontractualterms.Thiswouldincludeanassessmentofwhether:(a)
legislation,administrativepracticeorlegalprecedentconfersupontheentityarighttopaymentforperformancetodateeventhoughthatrightisnotspecifiedinthecontractwiththecustomer;
relevantlegalprecedentindicatesthatsimilarrightstopaymentforperformancecompletedtodateinsimilarcontractshavenobindinglegaleffect;or
anentity’scustomarybusinesspracticesofchoosingnottoenforcearighttopaymenthasresultedintherightbeingrenderedunenforceableinthatlegalenvironment.However,notwithstandingthatanentitymaychoosetowaiveitsrighttopaymentinsimilarcontracts,anentitywouldcontinuetohavearighttopaymenttodateif,inthecontractwiththecustomer,itsrighttopaymentforperformancetodateremainsenforceable.
(b)
(c)
B13
Thepaymentschedulespecifiedinacontractdoesnotnecessarilyindicatewhetheranentityhasanenforceablerighttopaymentforperformancecompletedtodate.Althoughthepaymentscheduleinacontractspecifiesthetimingandamountofconsiderationthatispayablebyacustomer,thepaymentschedulemightnotnecessarilyprovideevidenceoftheentity’srighttopaymentforperformancecompletedtodate.Thisisbecause,forexample,thecontractcouldspecifythattheconsiderationreceivedfromthecustomerisrefundableforreasonsotherthantheentityfailingtoperformaspromisedinthecontract.
Methodsformeasuringprogresstowardscompletesatisfactionofaperformanceobligation
B14
Methodsthatcanbeusedtomeasureanentity’sprogresstowardscompletesatisfactionofaperformanceobligationsatisfiedovertimeinaccordancewithparagraphs35–37includethefollowing:(a)(b)
outputmethods(seeparagraphsB15–B17);andinputmethods(seeparagraphsB18–B19).
Outputmethods
B15
Outputmethodsrecogniserevenueonthebasisofdirectmeasurementsofthevaluetothecustomerofthegoodsorservicestransferredtodaterelativetotheremaininggoodsorservicespromisedunderthecontract.Outputmethodsincludemethodssuchassurveysofperformancecompletedtodate,appraisalsofresultsachieved,milestonesreached,timeelapsedandunitsproducedorunitsdelivered.Whenanentityevaluateswhethertoapplyanoutputmethodtomeasureitsprogress,theentityshallconsiderwhethertheoutputselectedwouldfaithfullydepicttheentity’sperformancetowardscompletesatisfaction
A698IFRSFoundation
IFRS15
oftheperformanceobligation.Anoutputmethodwouldnotprovideafaithfuldepictionoftheentity’sperformanceiftheoutputselectedwouldfailtomeasuresomeofthegoodsorservicesforwhichcontrolhastransferredtothecustomer.Forexample,outputmethodsbasedonunitsproducedorunitsdeliveredwouldnotfaithfullydepictanentity’sperformanceinsatisfyingaperformanceobligationif,attheendofthereportingperiod,theentity’sperformancehasproducedworkinprogressorfinishedgoodscontrolledbythecustomerthatarenotincludedinthemeasurementoftheoutput.
B16
Asapracticalexpedient,ifanentityhasarighttoconsiderationfromacustomerinanamountthatcorrespondsdirectlywiththevaluetothecustomeroftheentity’sperformancecompletedtodate(forexample,aservicecontractinwhichanentitybillsafixedamountforeachhourofserviceprovided),theentitymayrecogniserevenueintheamounttowhichtheentityhasarighttoinvoice.
Thedisadvantagesofoutputmethodsarethattheoutputsusedtomeasureprogressmaynotbedirectlyobservableandtheinformationrequiredtoapplythemmaynotbeavailabletoanentitywithoutunduecost.Therefore,aninputmethodmaybenecessary.
B17
Inputmethods
B18
Inputmethodsrecogniserevenueonthebasisoftheentity’seffortsorinputstothesatisfactionofaperformanceobligation(forexample,resourcesconsumed,labourhoursexpended,costsincurred,timeelapsedormachinehoursused)relativetothetotalexpectedinputstothesatisfactionofthatperformanceobligation.Iftheentity’seffortsorinputsareexpendedevenlythroughouttheperformanceperiod,itmaybeappropriatefortheentitytorecogniserevenueonastraight-linebasis.
Ashortcomingofinputmethodsisthattheremaynotbeadirectrelationshipbetweenanentity’sinputsandthetransferofcontrolofgoodsorservicestoacustomer.Therefore,anentityshallexcludefromaninputmethodtheeffectsofanyinputsthat,inaccordancewiththeobjectiveofmeasuringprogressinparagraph39,donotdepicttheentity’sperformanceintransferringcontrolofgoodsorservicestothecustomer.Forinstance,whenusingacost-basedinputmethod,anadjustmenttothemeasureofprogressmayberequiredinthefollowingcircumstances:(a)
Whenacostincurreddoesnotcontributetoanentity’sprogressinsatisfyingtheperformanceobligation.Forexample,anentitywouldnotrecogniserevenueonthebasisofcostsincurredthatareattributabletosignificantinefficienciesintheentity’sperformancethatwerenotreflectedinthepriceofthecontract(forexample,thecostsofunexpectedamountsofwastedmaterials,labourorotherresourcesthatwereincurredtosatisfytheperformanceobligation).
Whenacostincurredisnotproportionatetotheentity’sprogressinsatisfyingtheperformanceobligation.Inthosecircumstances,thebestdepictionoftheentity’sperformancemaybetoadjusttheinputmethodtorecogniserevenueonlytotheextentofthatcostincurred.Forexample,afaithfuldepictionofanentity’sperformancemightbeto
B19
(b)
IFRSFoundationA699
IFRS15
recogniserevenueatanamountequaltothecostofagoodusedtosatisfyaperformanceobligationiftheentityexpectsatcontractinceptionthatallofthefollowingconditionswouldbemet:(i)(ii)(iii)
thegoodisnotdistinct;
thecustomerisexpectedtoobtaincontrolofthegoodsignificantlybeforereceivingservicesrelatedtothegood;thecostofthetransferredgoodissignificantrelativetothetotalexpectedcoststocompletelysatisfytheperformanceobligation;and
theentityprocuresthegoodfromathirdpartyandisnotsignificantlyinvolvedindesigningandmanufacturingthegood(buttheentityisactingasaprincipalinaccordancewithparagraphsB34–B38).
(iv)
Salewitharightofreturn
B20
Insomecontracts,anentitytransferscontrolofaproducttoacustomerandalsograntsthecustomertherighttoreturntheproductforvariousreasons(suchasdissatisfactionwiththeproduct)andreceiveanycombinationofthefollowing:(a)(b)(c)
B21
afullorpartialrefundofanyconsiderationpaid;
acreditthatcanbeappliedagainstamountsowed,orthatwillbeowed,totheentity;and
anotherproductinexchange.
Toaccountforthetransferofproductswitharightofreturn(andforsomeservicesthatareprovidedsubjecttoarefund),anentityshallrecogniseallofthefollowing:(a)
revenueforthetransferredproductsintheamountofconsiderationtowhichtheentityexpectstobeentitled(therefore,revenuewouldnotberecognisedfortheproductsexpectedtobereturned);arefundliability;and
anasset(andcorrespondingadjustmenttocostofsales)foritsrighttorecoverproductsfromcustomersonsettlingtherefundliability.
(b)(c)
B22
Anentity’spromisetostandreadytoacceptareturnedproductduringthereturnperiodshallnotbeaccountedforasaperformanceobligationinadditiontotheobligationtoprovidearefund.
Anentityshallapplytherequirementsinparagraphs47–72(includingtherequirementsforconstrainingestimatesofvariableconsiderationinparagraphs56–58)todeterminetheamountofconsiderationtowhichtheentityexpectstobeentitled(ieexcludingtheproductsexpectedtobereturned).Foranyamountsreceived(orreceivable)forwhichanentitydoesnotexpecttobeentitled,theentityshallnotrecogniserevenuewhenittransfersproductstocustomersbutshallrecognisethoseamountsreceived(orreceivable)asarefundliability.Subsequently,attheendofeachreportingperiod,theentityshallupdateitsassessmentofamountsforwhichitexpectstobeentitledinexchange
B23
A700IFRSFoundation
IFRS15
forthetransferredproductsandmakeacorrespondingchangetothetransactionpriceand,therefore,intheamountofrevenuerecognised.
B24
Anentityshallupdatethemeasurementoftherefundliabilityattheendofeachreportingperiodforchangesinexpectationsabouttheamountofrefunds.Anentityshallrecognisecorrespondingadjustmentsasrevenue(orreductionsofrevenue).
Anassetrecognisedforanentity’srighttorecoverproductsfromacustomeronsettlingarefundliabilityshallinitiallybemeasuredbyreferencetotheformercarryingamountoftheproduct(forexample,inventory)lessanyexpectedcoststorecoverthoseproducts(includingpotentialdecreasesinthevaluetotheentityofreturnedproducts).Attheendofeachreportingperiod,anentityshallupdatethemeasurementoftheassetarisingfromchangesinexpectationsaboutproductstobereturned.Anentityshallpresenttheassetseparatelyfromtherefundliability.
Exchangesbycustomersofoneproductforanotherofthesametype,quality,conditionandprice(forexample,onecolourorsizeforanother)arenotconsideredreturnsforthepurposesofapplyingthisStandard.
ContractsinwhichacustomermayreturnadefectiveproductinexchangeforafunctioningproductshallbeevaluatedinaccordancewiththeguidanceonwarrantiesinparagraphsB28–B33.
B25
B26
B27
Warranties
B28
Itiscommonforanentitytoprovide(inaccordancewiththecontract,thelawortheentity’scustomarybusinesspractices)awarrantyinconnectionwiththesaleofaproduct(whetheragoodorservice).Thenatureofawarrantycanvarysignificantlyacrossindustriesandcontracts.Somewarrantiesprovideacustomerwithassurancethattherelatedproductwillfunctionasthepartiesintendedbecauseitcomplieswithagreed-uponspecifications.Otherwarrantiesprovidethecustomerwithaserviceinadditiontotheassurancethattheproductcomplieswithagreed-uponspecifications.
Ifacustomerhastheoptiontopurchaseawarrantyseparately(forexample,becausethewarrantyispricedornegotiatedseparately),thewarrantyisadistinctservicebecausetheentitypromisestoprovidetheservicetothecustomerinadditiontotheproductthathasthefunctionalitydescribedinthecontract.Inthosecircumstances,anentityshallaccountforthepromisedwarrantyasaperformanceobligationinaccordancewithparagraphs22–30andallocateaportionofthetransactionpricetothatperformanceobligationinaccordancewithparagraphs73–86.
Ifacustomerdoesnothavetheoptiontopurchaseawarrantyseparately,anentityshallaccountforthewarrantyinaccordancewithIAS37Provisions,ContingentLiabilitiesandContingentAssetsunlessthepromisedwarranty,orapartofthepromisedwarranty,providesthecustomerwithaserviceinadditiontotheassurancethattheproductcomplieswithagreed-uponspecifications.Inassessingwhetherawarrantyprovidesacustomerwithaserviceinadditiontotheassurancethattheproductcomplieswithagreed-uponspecifications,anentityshallconsiderfactorssuchas:
B29
B30
B31
IFRSFoundationA701
IFRS15
(a)
Whetherthewarrantyisrequiredbylaw—iftheentityisrequiredbylawtoprovideawarranty,theexistenceofthatlawindicatesthatthepromisedwarrantyisnotaperformanceobligationbecausesuchrequirementstypicallyexisttoprotectcustomersfromtheriskofpurchasingdefectiveproducts.
Thelengthofthewarrantycoverageperiod—thelongerthecoverageperiod,themorelikelyitisthatthepromisedwarrantyisaperformanceobligationbecauseitismorelikelytoprovideaserviceinadditiontotheassurancethattheproductcomplieswithagreed-uponspecifications.Thenatureofthetasksthattheentitypromisestoperform—ifitisnecessaryforanentitytoperformspecifiedtaskstoprovidetheassurancethataproductcomplieswithagreed-uponspecifications(forexample,areturnshippingserviceforadefectiveproduct),thenthosetaskslikelydonotgiverisetoaperformanceobligation.
(b)
(c)
B32
Ifawarranty,orapartofawarranty,providesacustomerwithaserviceinadditiontotheassurancethattheproductcomplieswithagreed-uponspecifications,thepromisedserviceisaperformanceobligation.Therefore,anentityshallallocatethetransactionpricetotheproductandtheservice.Ifanentitypromisesbothanassurance-typewarrantyandaservice-typewarrantybutcannotreasonablyaccountforthemseparately,theentityshallaccountforbothofthewarrantiestogetherasasingleperformanceobligation.
Alawthatrequiresanentitytopaycompensationifitsproductscauseharmordamagedoesnotgiverisetoaperformanceobligation.Forexample,amanufacturermightsellproductsinajurisdictioninwhichthelawholdsthemanufacturerliableforanydamages(forexample,topersonalproperty)thatmightbecausedbyaconsumerusingaproductforitsintendedpurpose.Similarly,anentity’spromisetoindemnifythecustomerforliabilitiesanddamagesarisingfromclaimsofpatent,copyright,trademarkorotherinfringementbytheentity’sproductsdoesnotgiverisetoaperformanceobligation.TheentityshallaccountforsuchobligationsinaccordancewithIAS37.
B33
Principalversusagentconsiderations
B34
Whenanotherpartyisinvolvedinprovidinggoodsorservicestoacustomer,theentityshalldeterminewhetherthenatureofitspromiseisaperformanceobligationtoprovidethespecifiedgoodsorservicesitself(ietheentityisaprincipal)ortoarrangeforthosegoodsorservicestobeprovidedbytheotherparty(ietheentityisanagent).Anentitydetermineswhetheritisaprincipaloranagentforeachspecifiedgoodorservicepromisedtothecustomer.Aspecifiedgoodorserviceisadistinctgoodorservice(oradistinctbundleofgoodsorservices)tobeprovidedtothecustomer(seeparagraphs27–30).Ifacontractwithacustomerincludesmorethanonespecifiedgoodorservice,anentitycouldbeaprincipalforsomespecifiedgoodsorservicesandanagentforothers.
Todeterminethenatureofitspromise(asdescribedinparagraphB34),theentityshall:
B34A
A702IFRSFoundation
IFRS15
(a)
identifythespecifiedgoodsorservicestobeprovidedtothecustomer(which,forexample,couldbearighttoagoodorservicetobeprovidedbyanotherparty(seeparagraph26));and
assesswhetheritcontrols(asdescribedinparagraph33)eachspecifiedgoodorservicebeforethatgoodorserviceistransferredtothecustomer.
(b)
B35
Anentityisaprincipalifitcontrolsthespecifiedgoodorservicebeforethatgoodorserviceistransferredtoacustomer.However,anentitydoesnotnecessarilycontrolaspecifiedgoodiftheentityobtainslegaltitletothatgoodonlymomentarilybeforelegaltitleistransferredtoacustomer.Anentitythatisaprincipalmaysatisfyitsperformanceobligationtoprovidethespecifiedgoodorserviceitselforitmayengageanotherparty(forexample,asubcontractor)tosatisfysomeoralloftheperformanceobligationonitsbehalf.
Whenanotherpartyisinvolvedinprovidinggoodsorservicestoacustomer,anentitythatisaprincipalobtainscontrolofanyoneofthefollowing:(a)(b)
agoodoranotherassetfromtheotherpartythatitthentransferstothecustomer.
arighttoaservicetobeperformedbytheotherparty,whichgivestheentitytheabilitytodirectthatpartytoprovidetheservicetothecustomerontheentity’sbehalf.
agoodorservicefromtheotherpartythatitthencombineswithothergoodsorservicesinprovidingthespecifiedgoodorservicetothecustomer.Forexample,ifanentityprovidesasignificantserviceofintegratinggoodsorservices(seeparagraph29(a))providedbyanotherpartyintothespecifiedgoodorserviceforwhichthecustomerhascontracted,theentitycontrolsthespecifiedgoodorservicebeforethatgoodorserviceistransferredtothecustomer.Thisisbecausetheentityfirstobtainscontroloftheinputstothespecifiedgoodorservice(whichincludesgoodsorservicesfromotherparties)anddirectstheirusetocreatethecombinedoutputthatisthespecifiedgoodorservice.
B35A
(c)
B35B
When(oras)anentitythatisaprincipalsatisfiesaperformanceobligation,theentityrecognisesrevenueinthegrossamountofconsiderationtowhichitexpectstobeentitledinexchangeforthespecifiedgoodorservicetransferred.Anentityisanagentiftheentity’sperformanceobligationistoarrangefortheprovisionofthespecifiedgoodorservicebyanotherparty.Anentitythatisanagentdoesnotcontrolthespecifiedgoodorserviceprovidedbyanotherpartybeforethatgoodorserviceistransferredtothecustomer.When(oras)anentitythatisanagentsatisfiesaperformanceobligation,theentityrecognisesrevenueintheamountofanyfeeorcommissiontowhichitexpectstobeentitledinexchangeforarrangingforthespecifiedgoodsorservicestobeprovidedbytheotherparty.Anentity’sfeeorcommissionmightbethenetamountofconsiderationthattheentityretainsafterpayingtheotherpartytheconsiderationreceivedinexchangeforthegoodsorservicestobeprovidedbythatparty.
B36
IFRSFoundationA703
IFRS15
B37
Indicatorsthatanentitycontrolsthespecifiedgoodorservicebeforeitistransferredtothecustomer(andisthereforeaprincipal(seeparagraphB35))include,butarenotlimitedto,thefollowing:(a)
theentityisprimarilyresponsibleforfulfillingthepromisetoprovidethespecifiedgoodorservice.Thistypicallyincludesresponsibilityfortheacceptabilityofthespecifiedgoodorservice(forexample,primaryresponsibilityforthegoodorservicemeetingcustomerspecifications).Iftheentityisprimarilyresponsibleforfulfillingthepromisetoprovidethespecifiedgoodorservice,thismayindicatethattheotherpartyinvolvedinprovidingthespecifiedgoodorserviceisactingontheentity’sbehalf.
theentityhasinventoryriskbeforethespecifiedgoodorservicehasbeentransferredtoacustomeroraftertransferofcontroltothecustomer(forexample,ifthecustomerhasarightofreturn).Forexample,iftheentityobtains,orcommitsitselftoobtain,thespecifiedgoodorservicebeforeobtainingacontractwithacustomer,thatmayindicatethattheentityhastheabilitytodirecttheuseof,andobtainsubstantiallyalloftheremainingbenefitsfrom,thegoodorservicebeforeitistransferredtothecustomer.
theentityhasdiscretioninestablishingthepriceforthespecifiedgoodorservice.Establishingthepricethatthecustomerpaysforthespecifiedgoodorservicemayindicatethattheentityhastheabilitytodirecttheuseofthatgoodorserviceandobtainsubstantiallyalloftheremainingbenefits.However,anagentcanhavediscretioninestablishingpricesinsomecases.Forexample,anagentmayhavesomeflexibilityinsettingpricesinordertogenerateadditionalrevenuefromitsserviceofarrangingforgoodsorservicestobeprovidedbyotherpartiestocustomers.
(b)
(c)
B37A
TheindicatorsinparagraphB37maybemoreorlessrelevanttotheassessmentofcontroldependingonthenatureofthespecifiedgoodorserviceandthetermsandconditionsofthecontract.Inaddition,differentindicatorsmayprovidemorepersuasiveevidenceindifferentcontracts.
Ifanotherentityassumestheentity’sperformanceobligationsandcontractualrightsinthecontractsothattheentityisnolongerobligedtosatisfytheperformanceobligationtotransferthespecifiedgoodorservicetothecustomer(ietheentityisnolongeractingastheprincipal),theentityshallnotrecogniserevenueforthatperformanceobligation.Instead,theentityshallevaluatewhethertorecogniserevenueforsatisfyingaperformanceobligationtoobtainacontractfortheotherparty(iewhethertheentityisactingasanagent).
B38
Customeroptionsforadditionalgoodsorservices
B39
Customeroptionstoacquireadditionalgoodsorservicesforfreeoratadiscountcomeinmanyforms,includingsalesincentives,customerawardcredits(orpoints),contractrenewaloptionsorotherdiscountsonfuturegoodsorservices.If,inacontract,anentitygrantsacustomertheoptiontoacquireadditionalgoodsorservices,thatoptiongivesrisetoaperformanceobligationinthe
B40
A704IFRSFoundation
IFRS15
contractonlyiftheoptionprovidesamaterialrighttothecustomerthatitwouldnotreceivewithoutenteringintothatcontract(forexample,adiscountthatisincrementaltotherangeofdiscountstypicallygivenforthosegoodsorservicestothatclassofcustomerinthatgeographicalareaormarket).Iftheoptionprovidesamaterialrighttothecustomer,thecustomerineffectpaystheentityinadvanceforfuturegoodsorservicesandtheentityrecognisesrevenuewhenthosefuturegoodsorservicesaretransferredorwhentheoptionexpires.
B41
Ifacustomerhastheoptiontoacquireanadditionalgoodorserviceatapricethatwouldreflectthestand-alonesellingpriceforthatgoodorservice,thatoptiondoesnotprovidethecustomerwithamaterialrighteveniftheoptioncanbeexercisedonlybyenteringintoapreviouscontract.Inthosecases,theentityhasmadeamarketingofferthatitshallaccountforinaccordancewiththisStandardonlywhenthecustomerexercisestheoptiontopurchasetheadditionalgoodsorservices.
Paragraph74requiresanentitytoallocatethetransactionpricetoperformanceobligationsonarelativestand-alonesellingpricebasis.Ifthestand-alonesellingpriceforacustomer’soptiontoacquireadditionalgoodsorservicesisnotdirectlyobservable,anentityshallestimateit.Thatestimateshallreflectthediscountthatthecustomerwouldobtainwhenexercisingtheoption,adjustedforbothofthefollowing:(a)(b)
B43
anydiscountthatthecustomercouldreceivewithoutexercisingtheoption;and
thelikelihoodthattheoptionwillbeexercised.
B42
Ifacustomerhasamaterialrighttoacquirefuturegoodsorservicesandthosegoodsorservicesaresimilartotheoriginalgoodsorservicesinthecontractandareprovidedinaccordancewiththetermsoftheoriginalcontract,thenanentitymay,asapracticalalternativetoestimatingthestand-alonesellingpriceoftheoption,allocatethetransactionpricetotheoptionalgoodsorservicesbyreferencetothegoodsorservicesexpectedtobeprovidedandthecorrespondingexpectedconsideration.Typically,thosetypesofoptionsareforcontractrenewals.
Customers’unexercisedrights
B44
Inaccordancewithparagraph106,uponreceiptofaprepaymentfromacustomer,anentityshallrecogniseacontractliabilityintheamountoftheprepaymentforitsperformanceobligationtotransfer,ortostandreadytotransfer,goodsorservicesinthefuture.Anentityshallderecognisethatcontractliability(andrecogniserevenue)whenittransfersthosegoodsorservicesand,therefore,satisfiesitsperformanceobligation.
Acustomer’snon-refundableprepaymenttoanentitygivesthecustomerarighttoreceiveagoodorserviceinthefuture(andobligestheentitytostandreadytotransferagoodorservice).However,customersmaynotexercisealloftheircontractualrights.Thoseunexercisedrightsareoftenreferredtoasbreakage.Ifanentityexpectstobeentitledtoabreakageamountinacontractliability,theentityshallrecognisetheexpectedbreakageamountasrevenueinproportiontothepatternofrightsexercisedbythecustomer.Ifanentitydoes
B45
B46
IFRSFoundationA705
IFRS15
notexpecttobeentitledtoabreakageamount,theentityshallrecognisetheexpectedbreakageamountasrevenuewhenthelikelihoodofthecustomerexercisingitsremainingrightsbecomesremote.Todeterminewhetheranentityexpectstobeentitledtoabreakageamount,theentityshallconsidertherequirementsinparagraphs56–58onconstrainingestimatesofvariableconsideration.
B47
Anentityshallrecognisealiability(andnotrevenue)foranyconsiderationreceivedthatisattributabletoacustomer’sunexercisedrightsforwhichtheentityisrequiredtoremittoanotherparty,forexample,agovernmententityinaccordancewithapplicableunclaimedpropertylaws.
Non-refundableupfrontfees(andsomerelatedcosts)
B48
Insomecontracts,anentitychargesacustomeranon-refundableupfrontfeeatornearcontractinception.Examplesincludejoiningfeesinhealthclubmembershipcontracts,activationfeesintelecommunicationcontracts,setupfeesinsomeservicescontractsandinitialfeesinsomesupplycontracts.Toidentifyperformanceobligationsinsuchcontracts,anentityshallassesswhetherthefeerelatestothetransferofapromisedgoodorservice.Inmanycases,eventhoughanon-refundableupfrontfeerelatestoanactivitythattheentityisrequiredtoundertakeatornearcontractinceptiontofulfilthecontract,thatactivitydoesnotresultinthetransferofapromisedgoodorservicetothecustomer(seeparagraph25).Instead,theupfrontfeeisanadvancepaymentforfuturegoodsorservicesand,therefore,wouldberecognisedasrevenuewhenthosefuturegoodsorservicesareprovided.TherevenuerecognitionperiodwouldextendbeyondtheinitialcontractualperiodiftheentitygrantsthecustomertheoptiontorenewthecontractandthatoptionprovidesthecustomerwithamaterialrightasdescribedinparagraphB40.
Ifthenon-refundableupfrontfeerelatestoagoodorservice,theentityshallevaluatewhethertoaccountforthegoodorserviceasaseparateperformanceobligationinaccordancewithparagraphs22–30.
Anentitymaychargeanon-refundablefeeinpartascompensationforcostsincurredinsettingupacontract(orotheradministrativetasksasdescribedinparagraph25).Ifthosesetupactivitiesdonotsatisfyaperformanceobligation,theentityshalldisregardthoseactivities(andrelatedcosts)whenmeasuringprogressinaccordancewithparagraphB19.Thatisbecausethecostsofsetupactivitiesdonotdepictthetransferofservicestothecustomer.Theentityshallassesswhethercostsincurredinsettingupacontracthaveresultedinanassetthatshallberecognisedinaccordancewithparagraph95.
B49
B50
B51
Licensing
B52
Alicenceestablishesacustomer’srightstotheintellectualpropertyofanentity.Licencesofintellectualpropertymayinclude,butarenotlimitedto,licencesofanyofthefollowing:(a)(b)
softwareandtechnology;
motionpictures,musicandotherformsofmediaandentertainment;
A706IFRSFoundation
IFRS15
(c)(d)
B53
franchises;and
patents,trademarksandcopyrights.
Inadditiontoapromisetograntalicence(orlicences)toacustomer,anentitymayalsopromisetotransferothergoodsorservicestothecustomer.Thosepromisesmaybeexplicitlystatedinthecontractorimpliedbyanentity’scustomarybusinesspractices,publishedpoliciesorspecificstatements(seeparagraph24).Aswithothertypesofcontracts,whenacontractwithacustomerincludesapromisetograntalicence(orlicences)inadditiontootherpromisedgoodsorservices,anentityappliesparagraphs22–30toidentifyeachoftheperformanceobligationsinthecontract.
Ifthepromisetograntalicenceisnotdistinctfromotherpromisedgoodsorservicesinthecontractinaccordancewithparagraphs26–30,anentityshallaccountforthepromisetograntalicenceandthoseotherpromisedgoodsorservicestogetherasasingleperformanceobligation.Examplesoflicencesthatarenotdistinctfromothergoodsorservicespromisedinthecontractincludethefollowing:(a)(b)
alicencethatformsacomponentofatangiblegoodandthatisintegraltothefunctionalityofthegood;and
alicencethatthecustomercanbenefitfromonlyinconjunctionwitharelatedservice(suchasanonlineserviceprovidedbytheentitythatenables,bygrantingalicence,thecustomertoaccesscontent).
B
B55
Ifthelicenceisnotdistinct,anentityshallapplyparagraphs31–38todeterminewhethertheperformanceobligation(whichincludesthepromisedlicence)isaperformanceobligationthatissatisfiedovertimeorsatisfiedatapointintime.Ifthepromisetograntthelicenceisdistinctfromtheotherpromisedgoodsorservicesinthecontractand,therefore,thepromisetograntthelicenceisaseparateperformanceobligation,anentityshalldeterminewhetherthelicencetransferstoacustomereitheratapointintimeorovertime.Inmakingthisdetermination,anentityshallconsiderwhetherthenatureoftheentity’spromiseingrantingthelicencetoacustomeristoprovidethecustomerwitheither:(a)(b)
arighttoaccesstheentity’sintellectualpropertyasitexiststhroughoutthelicenceperiod;or
arighttousetheentity’sintellectualpropertyasitexistsatthepointintimeatwhichthelicenceisgranted.
B56
Determiningthenatureoftheentity’spromise
B57B58
[Deleted]
Thenatureofanentity’spromiseingrantingalicenceisapromisetoprovidearighttoaccesstheentity’sintellectualpropertyifallofthefollowingcriteriaaremet:(a)
thecontractrequires,orthecustomerreasonablyexpects,thattheentitywillundertakeactivitiesthatsignificantlyaffecttheintellectualpropertytowhichthecustomerhasrights(seeparagraphsB59andB59A);
IFRSFoundationA707
IFRS15
(b)
therightsgrantedbythelicencedirectlyexposethecustomertoanypositiveornegativeeffectsoftheentity’sactivitiesidentifiedinparagraphB58(a);and
thoseactivitiesdonotresultinthetransferofagoodoraservicetothecustomerasthoseactivitiesoccur(seeparagraph25).
(c)
B59
Factorsthatmayindicatethatacustomercouldreasonablyexpectthatanentitywillundertakeactivitiesthatsignificantlyaffecttheintellectualpropertyincludetheentity’scustomarybusinesspractices,publishedpoliciesorspecificstatements.Althoughnotdeterminative,theexistenceofasharedeconomicinterest(forexample,asales-basedroyalty)betweentheentityandthecustomerrelatedtotheintellectualpropertytowhichthecustomerhasrightsmayalsoindicatethatthecustomercouldreasonablyexpectthattheentitywillundertakesuchactivities.
Anentity’sactivitiessignificantlyaffecttheintellectualpropertytowhichthecustomerhasrightswheneither:(a)
thoseactivitiesareexpectedtosignificantlychangetheform(forexample,thedesignorcontent)orthefunctionality(forexample,theabilitytoperformafunctionortask)oftheintellectualproperty;ortheabilityofthecustomertoobtainbenefitfromtheintellectualpropertyissubstantiallyderivedfrom,ordependentupon,thoseactivities.Forexample,thebenefitfromabrandisoftenderivedfrom,ordependentupon,theentity’songoingactivitiesthatsupportormaintainthevalueoftheintellectualproperty.
B59A
(b)
Accordingly,iftheintellectualpropertytowhichthecustomerhasrightshassignificantstand-alonefunctionality,asubstantialportionofthebenefitofthatintellectualpropertyisderivedfromthatfunctionality.Consequently,theabilityofthecustomertoobtainbenefitfromthatintellectualpropertywouldnotbesignificantlyaffectedbytheentity’sactivitiesunlessthoseactivitiessignificantlychangeitsformorfunctionality.Typesofintellectualpropertythatoftenhavesignificantstand-alonefunctionalityincludesoftware,biologicalcompoundsordrugformulas,andcompletedmediacontent(forexample,films,televisionshowsandmusicrecordings).
B60
IfthecriteriainparagraphB58aremet,anentityshallaccountforthepromisetograntalicenceasaperformanceobligationsatisfiedovertimebecausethecustomerwillsimultaneouslyreceiveandconsumethebenefitfromtheentity’sperformanceofprovidingaccesstoitsintellectualpropertyastheperformanceoccurs(seeparagraph35(a)).Anentityshallapplyparagraphs39–45toselectanappropriatemethodtomeasureitsprogresstowardscompletesatisfactionofthatperformanceobligationtoprovideaccess.
IfthecriteriainparagraphB58arenotmet,thenatureofanentity’spromiseistoprovidearighttousetheentity’sintellectualpropertyasthatintellectualpropertyexists(intermsofformandfunctionality)atthepointintimeatwhichthelicenceisgrantedtothecustomer.Thismeansthatthecustomercandirecttheuseof,andobtainsubstantiallyalloftheremainingbenefitsfrom,thelicenceatthepointintimeatwhichthelicencetransfers.Anentityshallaccountforthepromisetoprovidearighttousetheentity’sintellectual
B61
A708IFRSFoundation
IFRS15
propertyasaperformanceobligationsatisfiedatapointintime.Anentityshallapplyparagraph38todeterminethepointintimeatwhichthelicencetransferstothecustomer.However,revenuecannotberecognisedforalicencethatprovidesarighttousetheentity’sintellectualpropertybeforethebeginningoftheperiodduringwhichthecustomerisabletouseandbenefitfromthelicence.Forexample,ifasoftwarelicenceperiodbeginsbeforeanentityprovides(orotherwisemakesavailable)tothecustomeracodethatenablesthecustomertoimmediatelyusethesoftware,theentitywouldnotrecogniserevenuebeforethatcodehasbeenprovided(orotherwisemadeavailable).
B62
Anentityshalldisregardthefollowingfactorswhendeterminingwhetheralicenceprovidesarighttoaccesstheentity’sintellectualpropertyorarighttousetheentity’sintellectualproperty:(a)
Restrictionsoftime,geographicalregionoruse—thoserestrictionsdefinetheattributesofthepromisedlicence,ratherthandefinewhethertheentitysatisfiesitsperformanceobligationatapointintimeorovertime.Guaranteesprovidedbytheentitythatithasavalidpatenttointellectualpropertyandthatitwilldefendthatpatentfromunauthoriseduse—apromisetodefendapatentrightisnotaperformanceobligationbecausetheactofdefendingapatentprotectsthevalueoftheentity’sintellectualpropertyassetsandprovidesassurancetothecustomerthatthelicencetransferredmeetsthespecificationsofthelicencepromisedinthecontract.
(b)
Sales-basedorusage-basedroyalties
B63
Notwithstandingtherequirementsinparagraphs56–59,anentityshallrecogniserevenueforasales-basedorusage-basedroyaltypromisedinexchangeforalicenceofintellectualpropertyonlywhen(oras)thelaterofthefollowingeventsoccurs:(a)(b)
thesubsequentsaleorusageoccurs;and
theperformanceobligationtowhichsomeorallofthesales-basedorusage-basedroyaltyhasbeenallocatedhasbeensatisfied(orpartiallysatisfied).
B63A
Therequirementforasales-basedorusage-basedroyaltyinparagraphB63applieswhentheroyaltyrelatesonlytoalicenceofintellectualpropertyorwhenalicenceofintellectualpropertyisthepredominantitemtowhichtheroyaltyrelates(forexample,thelicenceofintellectualpropertymaybethepredominantitemtowhichtheroyaltyrelateswhentheentityhasareasonableexpectationthatthecustomerwouldascribesignificantlymorevaluetothelicencethantotheothergoodsorservicestowhichtheroyaltyrelates).WhentherequirementinparagraphB63Aismet,revenuefromasales-basedorusage-basedroyaltyshallberecognisedwhollyinaccordancewithparagraphB63.WhentherequirementinparagraphB63Aisnotmet,therequirementsonvariableconsiderationinparagraphs50–59applytothesales-basedorusage-basedroyalty.
B63B
IFRSFoundationA709
IFRS15
Repurchaseagreements
B
Arepurchaseagreementisacontractinwhichanentitysellsanassetandalsopromisesorhastheoption(eitherinthesamecontractorinanothercontract)torepurchasetheasset.Therepurchasedassetmaybetheassetthatwasoriginallysoldtothecustomer,anassetthatissubstantiallythesameasthatasset,oranotherassetofwhichtheassetthatwasoriginallysoldisacomponent.Repurchaseagreementsgenerallycomeinthreeforms:(a)(b)(c)
anentity’sobligationtorepurchasetheasset(aforward);anentity’srighttorepurchasetheasset(acalloption);and
anentity’sobligationtorepurchasetheassetatthecustomer’srequest(aputoption).
B65
Aforwardoracalloption
B66
Ifanentityhasanobligationorarighttorepurchasetheasset(aforwardoracalloption),acustomerdoesnotobtaincontroloftheassetbecausethecustomerislimitedinitsabilitytodirecttheuseof,andobtainsubstantiallyalloftheremainingbenefitsfrom,theasseteventhoughthecustomermayhavephysicalpossessionoftheasset.Consequently,theentityshallaccountforthecontractaseitherofthefollowing:(a)
aleaseinaccordancewithIFRS16Leasesiftheentitycanormustrepurchasetheassetforanamountthatislessthantheoriginalsellingpriceoftheasset,unlessthecontractispartofasaleandleasebacktransaction.Ifthecontractispartofasaleandleasebacktransaction,theentityshallcontinuetorecognisetheassetandshallrecogniseafinancialliabilityforanyconsiderationreceivedfromthecustomer.TheentityshallaccountforthefinancialliabilityinaccordancewithIFRS9;or
afinancingarrangementinaccordancewithparagraphB68iftheentitycanormustrepurchasetheassetforanamountthatisequaltoormorethantheoriginalsellingpriceoftheasset.
(b)
B67B68
Whencomparingtherepurchasepricewiththesellingprice,anentityshallconsiderthetimevalueofmoney.
Iftherepurchaseagreementisafinancingarrangement,theentityshallcontinuetorecognisetheassetandalsorecogniseafinancialliabilityforanyconsiderationreceivedfromthecustomer.Theentityshallrecognisethedifferencebetweentheamountofconsiderationreceivedfromthecustomerandtheamountofconsiderationtobepaidtothecustomerasinterestand,ifapplicable,asprocessingorholdingcosts(forexample,insurance).
Iftheoptionlapsesunexercised,anentityshallderecognisetheliabilityandrecogniserevenue.
B69
Aputoption
B70
Ifanentityhasanobligationtorepurchasetheassetatthecustomer’srequest(aputoption)atapricethatislowerthantheoriginalsellingpriceoftheasset,
A710IFRSFoundation
IFRS15
theentityshallconsideratcontractinceptionwhetherthecustomerhasasignificanteconomicincentivetoexercisethatright.Thecustomer’sexercisingofthatrightresultsinthecustomereffectivelypayingtheentityconsiderationfortherighttouseaspecifiedassetforaperiodoftime.Therefore,ifthecustomerhasasignificanteconomicincentivetoexercisethatright,theentityshallaccountfortheagreementasaleaseinaccordancewithIFRS16,unlessthecontractispartofasaleandleasebacktransaction.Ifthecontractispartofasaleandleasebacktransaction,theentityshallcontinuetorecognisetheassetandshallrecogniseafinancialliabilityforanyconsiderationreceivedfromthecustomer.TheentityshallaccountforthefinancialliabilityinaccordancewithIFRS9.
B71
Todeterminewhetheracustomerhasasignificanteconomicincentivetoexerciseitsright,anentityshallconsidervariousfactors,includingtherelationshipoftherepurchasepricetotheexpectedmarketvalueoftheassetatthedateoftherepurchaseandtheamountoftimeuntiltherightexpires.Forexample,iftherepurchasepriceisexpectedtosignificantlyexceedthemarketvalueoftheasset,thismayindicatethatthecustomerhasasignificanteconomicincentivetoexercisetheputoption.
Ifthecustomerdoesnothaveasignificanteconomicincentivetoexerciseitsrightatapricethatislowerthantheoriginalsellingpriceoftheasset,theentityshallaccountfortheagreementasifitwerethesaleofaproductwitharightofreturnasdescribedinparagraphsB20–B27.
Iftherepurchasepriceoftheassetisequaltoorgreaterthantheoriginalsellingpriceandismorethantheexpectedmarketvalueoftheasset,thecontractisineffectafinancingarrangementand,therefore,shallbeaccountedforasdescribedinparagraphB68.
Iftherepurchasepriceoftheassetisequaltoorgreaterthantheoriginalsellingpriceandislessthanorequaltotheexpectedmarketvalueoftheasset,andthecustomerdoesnothaveasignificanteconomicincentivetoexerciseitsright,thentheentityshallaccountfortheagreementasifitwerethesaleofaproductwitharightofreturnasdescribedinparagraphsB20–B27.
Whencomparingtherepurchasepricewiththesellingprice,anentityshallconsiderthetimevalueofmoney.
Iftheoptionlapsesunexercised,anentityshallderecognisetheliabilityandrecogniserevenue.
B72
B73
B74
B75B76
Consignmentarrangements
B77
Whenanentitydeliversaproducttoanotherparty(suchasadealeroradistributor)forsaletoendcustomers,theentityshallevaluatewhetherthatotherpartyhasobtainedcontroloftheproductatthatpointintime.Aproductthathasbeendeliveredtoanotherpartymaybeheldinaconsignmentarrangementifthatotherpartyhasnotobtainedcontroloftheproduct.Accordingly,anentityshallnotrecogniserevenueupondeliveryofaproducttoanotherpartyifthedeliveredproductisheldonconsignment.
Indicatorsthatanarrangementisaconsignmentarrangementinclude,butarenotlimitedto,thefollowing:
B78
IFRSFoundationA711
IFRS15
(a)
theproductiscontrolledbytheentityuntilaspecifiedeventoccurs,suchasthesaleoftheproducttoacustomerofthedealeroruntilaspecifiedperiodexpires;
theentityisabletorequirethereturnoftheproductortransfertheproducttoathirdparty(suchasanotherdealer);and
thedealerdoesnothaveanunconditionalobligationtopayfortheproduct(althoughitmightberequiredtopayadeposit).
(b)(c)
Bill-and-holdarrangements
B79
Abill-and-holdarrangementisacontractunderwhichanentitybillsacustomerforaproductbuttheentityretainsphysicalpossessionoftheproductuntilitistransferredtothecustomeratapointintimeinthefuture.Forexample,acustomermayrequestanentitytoenterintosuchacontractbecauseofthecustomer’slackofavailablespacefortheproductorbecauseofdelaysinthecustomer’sproductionschedules.
Anentityshalldeterminewhenithassatisfieditsperformanceobligationtotransferaproductbyevaluatingwhenacustomerobtainscontrolofthatproduct(seeparagraph38).Forsomecontracts,controlistransferredeitherwhentheproductisdeliveredtothecustomer’ssiteorwhentheproductisshipped,dependingonthetermsofthecontract(includingdeliveryandshippingterms).However,forsomecontracts,acustomermayobtaincontrolofaproducteventhoughthatproductremainsinanentity’sphysicalpossession.Inthatcase,thecustomerhastheabilitytodirecttheuseof,andobtainsubstantiallyalloftheremainingbenefitsfrom,theproducteventhoughithasdecidednottoexerciseitsrighttotakephysicalpossessionofthatproduct.Consequently,theentitydoesnotcontroltheproduct.Instead,theentityprovidescustodialservicestothecustomeroverthecustomer’sasset.
Inadditiontoapplyingtherequirementsinparagraph38,foracustomertohaveobtainedcontrolofaproductinabill-and-holdarrangement,allofthefollowingcriteriamustbemet:(a)(b)(c)(d)
B82
thereasonforthebill-and-holdarrangementmustbesubstantive(forexample,thecustomerhasrequestedthearrangement);
theproductmustbeidentifiedseparatelyasbelongingtothecustomer;theproductcurrentlymustbereadyforphysicaltransfertothecustomer;and
theentitycannothavetheabilitytousetheproductortodirectittoanothercustomer.
B80
B81
Ifanentityrecognisesrevenueforthesaleofaproductonabill-and-holdbasis,theentityshallconsiderwhetherithasremainingperformanceobligations(forexample,forcustodialservices)inaccordancewithparagraphs22–30towhichtheentityshallallocateaportionofthetransactionpriceinaccordancewithparagraphs73–86.
A712IFRSFoundation
IFRS15
Customeracceptance
B83
Inaccordancewithparagraph38(e),acustomer’sacceptanceofanassetmayindicatethatthecustomerhasobtainedcontroloftheasset.Customeracceptanceclausesallowacustomertocancelacontractorrequireanentitytotakeremedialactionifagoodorservicedoesnotmeetagreed-uponspecifications.Anentityshallconsidersuchclauseswhenevaluatingwhenacustomerobtainscontrolofagoodorservice.
Ifanentitycanobjectivelydeterminethatcontrolofagoodorservicehasbeentransferredtothecustomerinaccordancewiththeagreed-uponspecificationsinthecontract,thencustomeracceptanceisaformalitythatwouldnotaffecttheentity’sdeterminationofwhenthecustomerhasobtainedcontrolofthegoodorservice.Forexample,ifthecustomeracceptanceclauseisbasedonmeetingspecifiedsizeandweightcharacteristics,anentitywouldbeabletodeterminewhetherthosecriteriahavebeenmetbeforereceivingconfirmationofthecustomer’sacceptance.Theentity’sexperiencewithcontractsforsimilargoodsorservicesmayprovideevidencethatagoodorserviceprovidedtothecustomerisinaccordancewiththeagreed-uponspecificationsinthecontract.Ifrevenueisrecognisedbeforecustomeracceptance,theentitystillmustconsiderwhetherthereareanyremainingperformanceobligations(forexample,installationofequipment)andevaluatewhethertoaccountforthemseparately.However,ifanentitycannotobjectivelydeterminethatthegoodorserviceprovidedtothecustomerisinaccordancewiththeagreed-uponspecificationsinthecontract,thentheentitywouldnotbeabletoconcludethatthecustomerhasobtainedcontroluntiltheentityreceivesthecustomer’sacceptance.Thatisbecauseinthatcircumstancetheentitycannotdeterminethatthecustomerhastheabilitytodirecttheuseof,andobtainsubstantiallyalloftheremainingbenefitsfrom,thegoodorservice.
Ifanentitydeliversproductstoacustomerfortrialorevaluationpurposesandthecustomerisnotcommittedtopayanyconsiderationuntilthetrialperiodlapses,controloftheproductisnottransferredtothecustomeruntileitherthecustomeracceptstheproductorthetrialperiodlapses.
B84
B85
B86
Disclosureofdisaggregatedrevenue
B87
Paragraph114requiresanentitytodisaggregaterevenuefromcontractswithcustomersintocategoriesthatdepicthowthenature,amount,timinganduncertaintyofrevenueandcashflowsareaffectedbyeconomicfactors.Consequently,theextenttowhichanentity’srevenueisdisaggregatedforthepurposesofthisdisclosuredependsonthefactsandcircumstancesthatpertaintotheentity’scontractswithcustomers.Someentitiesmayneedtousemorethanonetypeofcategorytomeettheobjectiveinparagraph114fordisaggregatingrevenue.Otherentitiesmaymeettheobjectivebyusingonlyonetypeofcategorytodisaggregaterevenue.
Whenselectingthetypeofcategory(orcategories)tousetodisaggregaterevenue,anentityshallconsiderhowinformationabouttheentity’srevenuehasbeenpresentedforotherpurposes,includingallofthefollowing:
B88
IFRSFoundationA713
IFRS15
(a)(b)(c)
disclosurespresentedoutsidethefinancialstatements(forexample,inearningsreleases,annualreportsorinvestorpresentations);
informationregularlyreviewedbythechiefoperatingdecisionmakerforevaluatingthefinancialperformanceofoperatingsegments;andotherinformationthatissimilartothetypesofinformationidentifiedinparagraphB88(a)and(b)andthatisusedbytheentityorusersoftheentity’sfinancialstatementstoevaluatetheentity’sfinancialperformanceormakeresourceallocationdecisions.
B
Examplesofcategoriesthatmightbeappropriateinclude,butarenotlimitedto,allofthefollowing:(a)(b)(c)(d)(e)(f)
typeofgoodorservice(forexample,majorproductlines);geographicalregion(forexample,countryorregion);marketortypeofcustomernon-governmentcustomers);
(for
example,
government
and
typeofcontract(forexample,fixed-priceandtime-and-materialscontracts);
contractduration(forexample,short-termandlong-termcontracts);timingoftransferofgoodsorservices(forexample,revenuefromgoodsorservicestransferredtocustomersatapointintimeandrevenuefromgoodsorservicestransferredovertime);and
saleschannels(forexample,goodssolddirectlytoconsumersandgoodssoldthroughintermediaries).
(g)
A714IFRSFoundation
IFRS15
AppendixC
Effectivedateandtransition
ThisappendixisanintegralpartoftheStandardandhasthesameauthorityastheotherpartsoftheStandard.
Effectivedate
C1
AnentityshallapplythisStandardforannualreportingperiodsbeginningonorafter1January2018.Earlierapplicationispermitted.IfanentityappliesthisStandardearlier,itshalldisclosethatfact.
IFRS16Leases,issuedinJanuary2016,amendedparagraphs5,97,B66andB70.AnentityshallapplythoseamendmentswhenitappliesIFRS16.
C1AC1B
ClarificationstoIFRS15RevenuefromContractswithCustomers,issuedinApril
2016,amendedparagraphs26,27,29,B1,B34–B38,B52–B53,B58,C2,C5andC7,deletedparagraphB57andaddedparagraphsB34A,B35A,B35B,B37A,B59A,B63A,B63B,C7AandC8A.Anentityshallapplythoseamendmentsforannualreportingperiodsbeginningonorafter1January2018.Earlierapplicationispermitted.Ifanentityappliesthoseamendmentsforanearlierperiod,itshalldisclosethatfact.
Transition
C2
ForthepurposesofthetransitionrequirementsinparagraphsC3–C8A:(a)(b)
thedateofinitialapplicationisthestartofthereportingperiodinwhichanentityfirstappliesthisStandard;and
acompletedcontractisacontractforwhichtheentityhastransferredallofthegoodsorservicesidentifiedinaccordancewithIAS11ConstructionContracts,IAS18RevenueandrelatedInterpretations.
C3AnentityshallapplythisStandardusingoneofthefollowingtwomethods:(a)
retrospectivelytoeachpriorreportingperiodpresentedinaccordancewithIAS8AccountingPolicies,ChangesinAccountingEstimatesandErrors,subjecttotheexpedientsinparagraphC5;or
retrospectivelywiththecumulativeeffectofinitiallyapplyingthisStandardrecognisedatthedateofinitialapplicationinaccordancewithparagraphsC7–C8.
(b)
C4
Notwithstandingtherequirementsofparagraph28ofIAS8,whenthisStandardisfirstapplied,anentityneedonlypresentthequantitativeinformationrequiredbyparagraph28(f)ofIAS8fortheannualperiodimmediatelyprecedingthefirstannualperiodforwhichthisStandardisapplied(the‘immediatelyprecedingperiod’)andonlyiftheentityappliesthisStandardretrospectivelyinaccordancewithparagraphC3(a).Anentitymayalsopresentthisinformationforthecurrentperiodorforearliercomparativeperiods,butisnotrequiredtodoso.
IFRSFoundationA715
IFRS15
C5
AnentitymayuseoneormoreofthefollowingpracticalexpedientswhenapplyingthisStandardretrospectivelyinaccordancewithparagraphC3(a):(a)
forcompletedcontracts,anentityneednotrestatecontractsthat:(i)(ii)
(b)
beginandendwithinthesameannualreportingperiod;orarecompletedcontractsatthebeginningoftheearliestperiodpresented.
forcompletedcontractsthathavevariableconsideration,anentitymayusethetransactionpriceatthedatethecontractwascompletedratherthanestimatingvariableconsiderationamountsinthecomparativereportingperiods.
forcontractsthatweremodifiedbeforethebeginningoftheearliestperiodpresented,anentityneednotretrospectivelyrestatethecontractforthosecontractmodificationsinaccordancewithparagraphs20–21.Instead,anentityshallreflecttheaggregateeffectofallofthemodificationsthatoccurbeforethebeginningoftheearliestperiodpresentedwhen:(i)(ii)(iii)
identifyingthesatisfiedandunsatisfiedperformanceobligations;determiningthetransactionprice;and
allocatingthetransactionpricetothesatisfiedandunsatisfiedperformanceobligations.
(c)
(d)
forallreportingperiodspresentedbeforethedateofinitialapplication,anentityneednotdisclosetheamountofthetransactionpriceallocatedtotheremainingperformanceobligationsandanexplanationofwhentheentityexpectstorecognisethatamountasrevenue(seeparagraph120).
C6
ForanyofthepracticalexpedientsinparagraphC5thatanentityuses,theentityshallapplythatexpedientconsistentlytoallcontractswithinallreportingperiodspresented.Inaddition,theentityshalldiscloseallofthefollowinginformation:(a)(b)
theexpedientsthathavebeenused;and
totheextentreasonablypossible,aqualitativeassessmentoftheestimatedeffectofapplyingeachofthoseexpedients.
C7
IfanentityelectstoapplythisStandardretrospectivelyinaccordancewithparagraphC3(b),theentityshallrecognisethecumulativeeffectofinitiallyapplyingthisStandardasanadjustmenttotheopeningbalanceofretainedearnings(orothercomponentofequity,asappropriate)oftheannualreportingperiodthatincludesthedateofinitialapplication.Underthistransitionmethod,anentitymayelecttoapplythisStandardretrospectivelyonlytocontractsthatarenotcompletedcontractsatthedateofinitialapplication(forexample,1January2018foranentitywitha31Decemberyear-end).
AnentityapplyingthisStandardretrospectivelyinaccordancewithparagraphC3(b)mayalsousethepracticalexpedientdescribedinparagraphC5(c),either:
C7A
A716IFRSFoundation
IFRS15
(a)(b)
forallcontractmodificationsthatoccurbeforethebeginningoftheearliestperiodpresented;or
forallcontractmodificationsthatoccurbeforethedateofinitialapplication.
Ifanentityusesthispracticalexpedient,theentityshallapplytheexpedientconsistentlytoallcontractsanddisclosetheinformationrequiredbyparagraphC6.
C8
Forreportingperiodsthatincludethedateofinitialapplication,anentityshallprovidebothofthefollowingadditionaldisclosuresifthisStandardisappliedretrospectivelyinaccordancewithparagraphC3(b):(a)
theamountbywhicheachfinancialstatementlineitemisaffectedinthecurrentreportingperiodbytheapplicationofthisStandardascomparedtoIAS11,IAS18andrelatedInterpretationsthatwereineffectbeforethechange;and
anexplanationofthereasonsforsignificantchangesidentifiedinC8(a).
(b)
C8A
AnentityshallapplyClarificationstoIFRS15(seeparagraphC1B)retrospectivelyinaccordancewithIAS8.Inapplyingtheamendmentsretrospectively,anentityshallapplytheamendmentsasiftheyhadbeenincludedinIFRS15atthedateofinitialapplication.Consequently,anentitydoesnotapplytheamendmentstoreportingperiodsortocontractstowhichtherequirementsofIFRS15arenotappliedinaccordancewithparagraphsC2–C8.Forexample,ifanentityappliesIFRS15inaccordancewithparagraphC3(b)onlytocontractsthatarenotcompletedcontractsatthedateofinitialapplication,theentitydoesnotrestatethecompletedcontractsatthedateofinitialapplicationofIFRS15fortheeffectsoftheseamendments.
ReferencestoIFRS9
C9
IfanentityappliesthisStandardbutdoesnotyetapplyIFRS9FinancialInstruments,anyreferenceinthisStandardtoIFRS9shallbereadasareferencetoIAS39FinancialInstruments:RecognitionandMeasurement.
WithdrawalofotherStandards
C10
ThisStandardsupersedesthefollowingStandards:(a)(b)(c)(d)(e)(f)
IAS11ConstructionContracts;IAS18Revenue;
IFRIC13CustomerLoyaltyProgrammes;
IFRIC15AgreementsfortheConstructionofRealEstate;IFRIC18TransfersofAssetsfromCustomers;and
SIC-31Revenue—BarterTransactionsInvolvingAdvertisingServices.
IFRSFoundationA717
IFRS15
AppendixD
AmendmentstootherStandards
ThisAppendixdescribestheamendmentstootherStandardsthattheIASBmadewhenitfinalisedIFRS15.Anentityshallapplytheamendmentsforannualperiodsbeginningonorafter1January2018.IfanentityappliesIFRS15foranearlierperiod,theseamendmentsshallbeappliedforthatearlierperiod.
*****
TheamendmentscontainedinthisappendixwhenthisStandardwasissuedin2014havebeenincorporatedintothetextoftherelevantStandardsincludedinthisvolume.A718IFRSFoundation
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