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IFRS 15 High Level Impact Assessment for Management

IFRS 15 High Level Impact Assessment for Management

Entities will apply a five step model to determine when to recognize revenue and at what amount. The model specifies that revenue should be recognized when (or as) an entity transfers control of goods or services to a customer at the amount to which the entity expects to be entitled. Depending on whether certain criteria are met, revenue is recognized;

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IFRS

Below are the five steps revenue recognition model under IFRS 15

  • Identify the contract
  • Identify performance obligations
  • Determine the transaction price
  • Allocate Transaction price
  • Recognise revenue 

Entities will apply a five step model to determine when to recognize revenueand at what amount. The model specifies that revenue should be recognizedwhen (or as) an entity transfers control of goods or services to a customer atthe amount to which theentity expects to be entitled. Depending on whethercertain criteria are met, revenue is recognized;

  • Over time, in a manner that depicts the entity’s performance; or
  • At a point in time, when control of the goods or services is transferred tothe customer

IFRS 15 requires a comprehensive implementation plan. Companies that havecommenced their initial impact assessment have been surprised at the lengthand complexity of the implementation phase.The new requirements will affect different companies in different ways. Allcompanies need to assess the extent of the impact, so that they can addressthe wider business implications – e.g. changes to the profile on margins oncontracts, systems and processes, compliance with debt covenants andemployee reward schemes.

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