Applying IFRS

IFRS 15 Revenue from Contracts with Customers

Presentation and disclosure requirements of IFRS 15

1 October 2017 Applying IFRS Presentation and disclosure requirements of IFRS 15

Contents

1. Introduction and disclosure objective 3

2. Whats changing from legacy IFRS? 5

3. Presentation within the primary financial statements 7

3.1 Revenue from contracts with customers 7

3.2 Contract balances 8

3.3 Assets recognised from the costs to obtain or fulfil a

contract 10

3.4 Assets and liabilities arising from rights of return 11

3.5 Significant financing components 11

4. Disclosures within the notes to the financial statements 12

4.1 Disaggregation of revenue 12

4.2 Contract balances 16

4.3 Performance obligations 21

4.4 Significant judgements 27

4.5 Assets recognised from the costs to obtain or fulfil a

contract 31

4.6 Practical expedients 33

5. Disclosures in interim financial statements 34

6. Transition disclosures 35

6.1 Disclosures under the full retrospective approach 35

6.2 Disclosures under the modified retrospective approach 40

6.3 Transition disclosures in interim financial statements in

the year of adoption 43

Appendix A: Extract from EYs IFRS Disclosure Checklist 44

October 2017 Applying IFRS Presentation and disclosure requirements of IFRS 15 2

What you need to know

IFRS 15 is effective for annual reporting periods beginning on or after 1 January 2018.

With only a few months left to implement the standard, entities may wish to make planning for the new presentation and disclosure requirements

a priority.

Entities may need to change aspects of their financial statement presentation and significantly expand the volume of their disclosures

when they adopt the new revenue recognition standard issued by the

IASB, even if they do not expect adoption of the standard to affect the

timing or measurement of revenue.

Entities will likely need to adjust their processes, controls and systems to capture the necessary data to meet the new presentation and disclosure

requirements.

3 October 2017 Applying IFRS Presentation and disclosure requirements of IFRS 15

1. Introduction and disclosure objective In May 2014, the International Accounting Standards Board (IASB) and the US

Financial Accounting Standards Board (FASB) (collectively, the Boards) issued

largely converged new revenue standards that supersede virtually all revenue

recognition requirements in legacy IFRS and US GAAP, respectively.1 The

standards provide accounting requirements that apply to all revenue arising

from contracts with customers (unless the contracts are in the scope of other

IFRSs or US GAAP requirements, such as the leasing standards). The standards

also specify the accounting for costs an entity incurs to obtain and fulfil

a contract to provide goods and services to customers and provide a model

for the measurement and recognition of gains and losses on the sale of certain

non-financial assets, such as property, plant or equipment.2

In response to criticism that legacy revenue recognition disclosures were

inadequate, the Boards sought to create a comprehensive and coherent set of

disclosures. The new disclosure requirements will affect all entities, even those

that may have concluded there will be little change to the timing and amount

of revenue they will recognise under the new standards. This aspect of the new

standards may present a significant challenge both on transition and on an

ongoing basis.

The objective of the disclosure requirements in the new standards is to provide

sufficient information to enable users of financial statements to understand

the nature, amount, timing and uncertainty of revenue and cash flows arising

from contracts with customers. To achieve that objective, entities are required

to provide disclosures about their contracts with customers, the significant

judgements, and changes in those judgements, used in applying the standards

and assets arising from costs to obtain and fulfil its contracts.3

While an entity must provide sufficient information to meet the objective, the

disclosures described in the standards are not intended to be a checklist of

minimum requirements. That is, entities do not need to include disclosures that

are not relevant or are not material to them. In addition, an entity does not need

to disclose information in accordance with the revenue standards if it discloses

that information in accordance with another standard.

Entities are required to consider the level of detail necessary to satisfy the

disclosure objective and the degree of emphasis to place on each of the various

requirements. The level of aggregation or disaggregation of disclosures will

require judgement. Furthermore, entities are required to ensure that useful

information is not obscured (by either the inclusion of a large amount of

insignificant detail or the aggregation of items that have substantially different

characteristics).

1 IFRS 15 Revenue from Contracts with Customers and Accounting Standards Codification

(ASC) 606, Revenue from Contracts with Customers (created by Accounting Standards Update (ASU) 2014-09) (together with IFRS 15, the standards). Throughout this publication, when we refer to the FASBs standard, we mean ASC 606 and the related cost guidance codified in ASC 340-40 (including all the recent amendments), unless otherwise noted.

2 Refer to our publication, Applying IFRS: The new revenue standard affects more than just revenue (February 2015), available on ey.com/IFRS.

3 IFRS 15.110.

http://www.ey.com/ifrs

October 2017 Applying IFRS Presentation and disclosure requirements of IFRS 15 4

How we see it

Entities should review their disclosures to determine whether they have met

the standards disclosure objective to enable users to understand the nature,

amount, timing and uncertainty of revenue and cash flows arising from

contracts with customers. For example, some entities may make large

payments to customers that do not represent payment for a distinct

good or service and therefore reduce the transaction price and affect the

amount and timing of revenue recognised. Although there are no specific

requirements in the standards to disclose balances related to consideration

paid or payable to a customer, an entity may need to disclose qualitative

and/or quantitative information about those arrangements to meet the

objective of the disclosure requirements if the amounts are material.

This publication provides a summary of the new presentation and disclosure

requirements in the IASBs standard, IFRS 15 Revenue from Contracts with

Customers, both at transition and on an ongoing basis. It also illustrates

possible formats entities could use to disclose information required by IFRS 15

using real-life examples from entities that have early adopted IFRS 15 or the

FASBs new revenue standard and/or illustrative examples. This publication

does not cover disclosures required by IAS 8 Accounting Policies, Changes in

Accounting Estimates and Errors prior to adoption.

Extracts from financial reports presented in this publication are reproduced for

illustrative purposes. They have not been subject to any review on compliance

with IFRS or US GAAP or any other requirements, such as local capital

market rules. This publication documents possible practices that entities have

developed and the extracts presented here are not intended to represent best

practice. We also remind readers that the extracts presented should be read in

conjunction with the rest of the information provided in the financial statements

in order to understand their intended purpose.

This publication supplements our Applying IFRS, A closer look at the new

revenue recognition standard4 (general publication) and should be read in

conjunction with it.

The views we express in this publication may evolve as implementation

continues and additional issues are identified. The conclusions we describe

in our illustrations are also subject to change as views evolve. Conclusions in

seemingly similar situations may differ from those reached in the illustrations

due to differences in the underlying facts and circumstances. Please see

ey.com/IFRS for our most recent revenue publications.

4 The most up-to-date version of this publication is available at www.ey.com/IFRS.

http://www.ey.com/ifrshttp://www.ey.com/ifrs

5 October 2017 Applying IFRS Presentation and disclosure requirements of IFRS 15

2. Whats changing from legacy IFRS? IFRS 15 provides explicit presentation and disclosure requirements that

are more detailed than under legacy IFRS (i.e., IAS 11 Construction Contracts,

IAS 18 Revenue and related Interpretations) and increase the volume of

required disclosures that entities will have to include in their interim and annual

financial statements. Many of the new requirements involve information that

entities have not previously disclosed.

In practice, the nature and extent of changes to