This is just one in a series of blog posts on the new revenue standard that we have summarized here, along with other resources to help you with implementation. In particular, IFRS 15 includes new guidance on accounting for repurchase agreements, including scenarios when those goods will or may be repurchased as part of another asset and when goods that … The amendments to IFRS 15 are not in all instances the same as those that the FASB is making to the US standard. endstream endobj startxref Outside a lack of technology, part of the challenge is also interpreting the rules. %PDF-1.5 %���� FOB Destination)). This paper accompanies the following IASB agenda papers: (a) Agenda paper 7A Implications of amending IFRS 15 before the mandatory effective date. 1 ASC 606/IFRS 15: THE DEFINITIVE GUIDE TO NEW REVENUE RECOGNITION RULES ASC 606/IFRS 15: The Definitive Guide to … 928 0 obj <>/Filter/FlateDecode/ID[<703E919981036549A52F172B6624A364><52207691B48FE947A59CB207D83E71B3>]/Index[902 41]/Info 901 0 R/Length 115/Prev 272792/Root 903 0 R/Size 943/Type/XRef/W[1 2 1]>>stream One follow up question I was hoping you could clarify. An entity is required to identify performance obligations on … So this feels like the right time to . I love Amazon Prime, especially around the holidays. those steps are. Thanks, Warren H: 12 of the 13 IASB members present agreed with these decisions. Methodology In line with this aim, publicly available financial reports of the leading multinational shipping This makes the current accounting easy as the costs to ship the goods are normally matched against the revenue from the sale. Our IFRS Newsletter: Revenue brings you the latest on the new revenue standard, IFRS 15. Others are deferred as they are eligible for capitalization under ASC 605 or industry practice. $3 Very good question, Jason! It is unclear whether the different decisions will lead to divergence because it appears that the boards may need further information to … IFRS 15 Revenue from Contracts with Customers — Your Questions Answered. ??? ... read more, Views on how restrictions on financial instruments impact the determination of fair value are evolving, potentially changing current practice for investment companies under ASC 946. IFRS IN PRACTICE 2017 – IFRS 15 REVENUE FROM CONTRACTS WITH CUSTOMERS 5 1. Comparing the New Revenue Recognition Standards: IFRS 15 and ASC 606 (August 30, 2016) As originally issued, IFRS 15 and ASC 606 were very similar with very little difference between the two standards. Perhaps reach out to me directly. Keep up-to-date on the latest insights and updates from the GAAP Dynamics team on all things accounting and auditing. Mar 22, 2020 at 07:09 AM, Mike, h�b```��lE cc`a��p�gb9�0Ⴆ�v�*f f}�M��L��q�e���'mp��!�P0��Fеk[��H��][�3Ω���⋠�@k�d>[�,���������ލ �L'����/��5r8&��w���L��P���2�� ��HZ. Do you just record the inventory at $103? I am not sure I follow though. The IASB decided to make some, but not identical, changes to its new revenue standard, IFRS 15, Revenue from Contracts with Customers. However, four ASUs later, the standards are moving further apart. The remaining portion of revenue (i.e. IFRS 15 provides the 5 step framework on how and when to recognize the sale. If so, what is the remaining credit, some sort of deferred revenue? For example, is "drop ship" from 3rd party suppliers/vendors equally determinable of control transfer? Components of a Contract (IFRS-15/ASC (606-10-25-2) b) … reviewed and modified in shipping com panies for implementing IFRS 15. Early adoption: For public business entities and certain not-for-profit entities the effective date for early adoption is the fiscal years beginning after Dec. 15, 2016. Repurchase Agreements. revenue is recognized upon delivery, including S&H fee, and then S&H fee is a cost of sales). IFRS 15 requires an entity to assess the goods or services promised in a contract to identify the performance obligations in that contract. Thanks for question, Ashish. ... read more. TheseIFRS 15 ED areas include accounting for licences, principal versus agent ... shipping and handling … This would be the case under both U.S. GAAP … Hope this helps, but I probably need a bit more information about your specific transaction to definitively opine. IFRS 15 states also that it is possible to recognise revenue on a straight-line basis if the entity’s efforts or inputs are spread evenly throughout the performance period. GAAP Dynamics is registered with the National Association of State Boards of Accountancy (NASBA) as a sponsor of continuing professional education on the National Registry of CPE Sponsors. IFRS 15 sets out a single and comprehensive framework for revenue recognition and, for many entities, the timing Yosef Barbut: Therefore passing it all along to the customer, where does this fall under GAAP? Thanks. See my response to Anne above for a bit more on IFRS. Thanks, Mike Walworth, CPA: Terms and Conditions | Privacy Policy, Impact of underwriter lock-ups fair value of equity securities. That aside, the GAAP treatment of S&H shouldn't matter and depends on when the customer takes control of the goods. In addition to the differences noted above, the FASB has provided an exception for accounting for shipping and handling activities and is … Midlothian, Virginia 23114, PH + 1 (804) 897-0608 Anne Worstenly: If so, the shipping and handling … Hi Mike, excellent note. In our case, the goods were sold “FOB Shipping Point,” meaning the customer takes control of the goods prior to shipment. This is the price (excluding shipping and handling fees) a seller has provided at which the same item, or one that is nearly identical to it, is being offered for sale or has been offered for sale in the recent past. revenue guidance in IFRS 15, Revenue from Contracts with Customers. What exactly are “repurchase agreements” and what is their impact on accounting for revenue under IFRS 15? The IASB recognizes that this may lead to differences between IFRS and U.S. GAAP but believes that IFRS 15, as written, is sufficient. FX + 1 (804) 897-0609, In this post, we are highlighting the 2020 AICPA Conference on Current SEC and PCAOB Developments which, for the first time, was held virtually! Basis for Conclusions to IFRS 15 and Example 19 include specific discussion on uninstalled materials (IFRS 15… Do you think it should it be considered a separate performance obligation by the seller under the new revenue recognition standard (ASC 606)? You recognize a portion of the revenue on the goods when control passes to the customer. Early adoption: For public business entities and certain not-for-profit entities the effective date for early adoption is the fiscal years beginning after Dec. 15… The relevant guidance is in ASC 605-45-45 … Nov 06, 2018 at 05:39 PM, Clear and easy to understand. After I wrote a couple of articles about IFRS 15 here and here, and after I discussed with some of my friends CFOs or auditors, there are two types of reactions:. Scribd es el sitio social de lectura y editoriales más grande del mundo. Help me clarify, we are a distributor, when the material arrives the warehouse, we add 3% to the value of what we received, calling it a shipping and handling fee, we then tell the sales person their new price to the customer is over and above this shipping and handling fee. Cr. Mike, great comments. IFRS 15 is the New Revenue standard issued by IASB to replace the IAS 18 and IAS 11. The accounting policy election provided by ASU 2016-10 is to be applied consistently to similar types of transactions. The article stopped short, however, of making the statement that "shipping and handling costs that are incurred after a customer takes control "must be treated as a separate performance obligation" or "should be assessed to determine..". Inventory $103 Of course, I'm sure some companies argue that S&H is immaterial, but that is a judgment call (and one you have to take up with your auditors). As such, they are expensed when incurred. For all other entites the effective date for interim periods is the fiscal years beginning after Dec. 15, 2019. Disclaimer This post is published to spread the love of GAAP and provided for informational purposes only. FOB shipping point), then S&H cannot be combined with the goods. IFRS 15, the IASB considered the need to balance being responsive to issues raised to help entities implement IFRS 15 but, ... and an accounting policy election relating to shipping and handling activities that the IASB is not proposing to address. Under IFRS 15, the accounting treatment is the same if both books are delivered at the same time. The transaction price is allocated to the various performance obligations and revenue is recognized for each performance obligation, either over time or at a point in time based on the rules within ASC 606. Reporting revenue under IFRS 15 is now one of the ordinary activities of companies in the 100+ countries that use IFRS Standards. It is imperative that entities take … Cr. Mike Walworth, CPA: take stock – to pull together, in one place, what we have learned about this new world of revenue recognition. © 2020 GAAP Dynamics All Rights Reserved. In addition, we take no responsibility for updating old posts, but may do so from time to time. Latest insight IFRS 15 Revenue: Practical experiences from the market. IFRS guidance does not allow an entity to make a policy election to account for shipping and handling activities that occur after the customer has obtained control of a good as an activity to fulfill the promise to transfer the good rather than as an additional promised service. IFRS 15 requires an entity to assess the goods or services promised in a contract to ... of a contract, and an accounting policy election relating to shipping and handling activities that the IASB is not proposing to address. As previously mentioned, many companies currently consider shipping and handling to be fulfillment activities and, thus, requiring them to account for such activities as a separate promised service, would be a significant change in practice. Under existing U.S. GAAP, many companies do not account for shipping and handling activities separately, but rather treat them as fulfillment costs. Some of the key differences between IFRS 15 and ASC 606 are as follows: Identification of distinct goods and services. separate performance obligation). The converged standard IFRS 15 Revenue from Contracts with Customers was issued on 28 May 2014 and must be applied in an entity's first annual IFRS financial statements … (IFRS 15 & ASC 606: 606-10-25-1 THROUGH 25-13) a) A contract is an agreement between 2 parties that creates enforceable rights and obligations. Under IFRS 15, For more information visit www.ifrs.org Page 1 of 3 1. What are fulfillment costs? the piece allocated to S&H) is only recognized once you've fulfilled your obligation to ship the goods. | Tags: Accounting. They also provide some transition relief for modified contracts and completed contracts. %%EOF However, if you deliver Thailand travel guide in September and Thai cuisine in October due to low stock, then you would need to split the transaction price of CU 50 based on the relative stand-alone selling prices and recognize revenue accordingly. IFRS 15 Revenue from Contracts with Customers – impact of adoption . Reporting revenue under IFRS 15 Revenue from Contracts with Customers is now one of your ordinary activities. In summary, if a promised good or service is “distinct,” it represents a separate performance obligation. for shipping and handling activities and is further expected to make narrow-scope amendments to the guidance on assessing collectability, presentation of sales-taxes and measuring non-cash … If your business is not a freight or shipping business (which I suspect it isn't) then what you are really talking about is shipping and handling costs. See Example 8 accompanying IFRS 15. However, if control passes to the customer after shipment (i.e. 20. I'm not sure if this is an election but I've seen some diversity in practice and am having trouble finding clear guidance. c) Each party’s rights to the G/S transferred are identified. The reasons for the IASB’s decisions are explained in paragraphs BC7- Hope this helps! Contact us International Accounting Standards Board 30 Cannon Street London EC4M 6XH United Kingdom Tel: +44 (0)20 7246 6410 Fax: +44 (0)20 7246 6411 E-mail: info@ifrs.org Website: www.ifrs.org: Future IASB meetings The IASB meets at least once a month for up to five days. Mike, Jason M.: 43 . You essentially have two performance obligations, one for the goods and one for S&H. Share with your friends. 942 0 obj <>stream IFRS 15 does not include the same specific guidance; however, IFRS reporters should consider the application of materiality concepts when identifying performance obligations. The answer is simple – free shipping! Does the accounting treatment differ from that under IFRS 15 (IFRS’s version of the new revenue recognition standard)? (IFRS 15 & ASC 606: 606-10-25-1 THROUGH 25-13) a) A contract is an agreement between 2 parties that creates enforceable rights and obligations. Shipping and handling activities When shipping and handling is performed after control of the good is transferred to the customer, the amendments permit entities, as an accounting policy election, to account for shipping and handling … take stock – to pull together, in one place, … When I say IFRS 15 doesn't provide for a similar accounting policy election, I mean that for S&H activities that take place AFTER a customer take control of the goods (i.e. Shipping and handling … Licences. ii. Cash $100 Mike Walworth, CPA: A really good plain-English write-up, that clearly and (almost) completely answers my question. They argued that providing entities with an accounting policy choice would create an exception to the new revenue recognition model, which could reduce comparability between entities. 19. Outside a lack of technology, part of the challenge is also interpreting the rules. Jun 27, 2018 at 11:50 PM. 151 Le Gordon Drive, Suite 101 Thanks for your question, Anne. 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Or outside cost of sales or outside cost of sales to anne above for a bit more on IFRS shipping. Latest insight IFRS 15 depends on when the customer with the goods when control the. 'S say your company purchased inventory for $ 100 diversity in practice and AM having finding! Of individual courses for CPE credit answers my question are “ repurchase agreements ” and what the... Jason M.: Nov 12, 2018 at 10:40 AM, thanks for your question, Clay $!
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