{"id":485,"date":"2017-09-30T06:56:47","date_gmt":"2017-09-29T22:56:47","guid":{"rendered":"http:\/\/ehluar.com\/main\/?p=485"},"modified":"2018-03-22T13:04:36","modified_gmt":"2018-03-22T05:04:36","slug":"revenue-the-5-step-model-part-3","status":"publish","type":"post","link":"http:\/\/ehluar.com\/main\/2017\/09\/30\/revenue-the-5-step-model-part-3\/","title":{"rendered":"Revenue – The 5-Step Model of New Revenue Standard (Part 3)"},"content":{"rendered":"

Step 2 Identify performance obligations in the contract<\/u><\/strong><\/p>\n

6.1\u00a0\u00a0 (IFRS 15) FRS 115 Revenue from Contracts with Customers<\/em> recognises that an entity may have promised more than one product or service to the customer, i.e., sale of 2 products as a bundle.<\/p>\n

6.2\u00a0\u00a0 Step 2 requires that the various performance obligations (POs) in the contract are identify and accounted for separately.<\/p>\n

6.3 \u00a0 A performance obligation (PO) is a promise<\/u> (explicit or implicit) to transfer a good or service (or a bundle of goods and services) to the customer that is distinct<\/u><\/strong>.<\/strong><\/p>\n

6.4\u00a0\u00a0 A performance obligation could also be a series of distinct goods or services that are substantially the same and that have the same pattern of transfer to the customer. For example, a routine or recurring cleaning services.<\/strong><\/p>\n

6.5\u00a0\u00a0 The promised goods or services may include (but not limited) to the following:<\/p>\n

(a)\u00a0\u00a0\u00a0\u00a0 sale of products<\/p>\n

(b)\u00a0\u00a0\u00a0\u00a0 resale of goods purchased<\/p>\n

(c)\u00a0\u00a0\u00a0\u00a0 provision of warranties<\/p>\n

(d)\u00a0\u00a0\u00a0\u00a0 performing an agreed-upon task<\/p>\n

(e)\u00a0\u00a0\u00a0\u00a0 providing a service to arrange for another party to transfer goods or services<\/p>\n

(f)\u00a0\u00a0\u00a0\u00a0 granting licences<\/p>\n

(g)\u00a0\u00a0\u00a0\u00a0 granting options to purchase for additional goods or services etc.<\/p>\n

6.6\u00a0\u00a0 The following summarises the standard\u2019s requirements to identify whether a good or services, or a bundle, is distinct.<\/p>\n

(a)\u00a0\u00a0 Step 1 is to focus on whether the goods or services is capable of being distinct<\/u><\/strong>.<\/strong><\/p>\n

Can the customer benefit from the good or services on its own or together with other readily available resources?<\/p>\n

(b)\u00a0\u00a0 Step 2 is to focus on whether the promised to transfer the good or service is distinct in the context of the contract<\/u><\/strong>.<\/p>\n

Is the good or service separately identifiable from other promises in the contract?<\/p>\n

(c)\u00a0\u00a0 For step 1 and<\/strong> 2, if the answer is:<\/p>\n

(i)\u00a0\u00a0\u00a0\u00a0\u00a0 Yes \u2013 account for as a performance obligation (PO)<\/p>\n

(ii)\u00a0\u00a0\u00a0\u00a0 No \u2013 combine 2 or more promised goods or services and re-evaluate.<\/p>\n

6.7 \u00a0 The following are factors that indicate that the goods or services are not distinct<\/u><\/strong>.<\/p>\n

(a)\u00a0\u00a0\u00a0\u00a0 the entity is using the good or service as an input to produce or deliver the combine output specified by the customer<\/p>\n

(b)\u00a0\u00a0\u00a0\u00a0 the good and service significantly modifies \/ customises another good or service promised in the contract<\/p>\n

(c)\u00a0\u00a0\u00a0\u00a0 the good or service is highly dependent on, or highly interrelated with, other goods or services promised in the contract.<\/p>\n

6.8\u00a0\u00a0 Performance obligations could be explicit or implicit.<\/p>\n

6.9\u00a0\u00a0 Summary of Step 2 Identify performance obligations in the contract<\/p>\n

(a)\u00a0\u00a0\u00a0\u00a0 (i)\u00a0\u00a0\u00a0\u00a0\u00a0 Performance obligations are promises (explicit or implicit) to transfer distinct goods or services or a series of distinct goods or services to the customer.<\/p>\n

\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 (ii)\u00a0\u00a0\u00a0\u00a0 Identified at contract inception based on contractual terms and customary business practice<\/p>\n

\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 (iii)\u00a0\u00a0 If distinct (both individually and in the context of the contract), promised goods or services are accounted for separately<\/p>\n

(b)\u00a0\u00a0\u00a0\u00a0 Key changes in FRS 115<\/p>\n

\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 (i)\u00a0\u00a0\u00a0\u00a0\u00a0 Current standard has limited requirements for transactions with multiple deliverables<\/p>\n

\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 (ii)\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 Entities may identify different performance obligations (i.e., more or less performance obligations) compared to deliverables identified under current.<\/p>\n

Last review: 30 September 2017<\/p>\n","protected":false},"excerpt":{"rendered":"

Step 2 Identify performance obligations in the contract 6.1\u00a0\u00a0 (IFRS 15) FRS 115 Revenue from Contracts with Customers recognises that an entity may have promised more than one product or service to the customer, i.e., sale of 2 products as a bundle. 6.2\u00a0\u00a0 Step 2 requires that the various performance obligations (POs) in the contract […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"nf_dc_page":"","_et_pb_use_builder":"","_et_pb_old_content":"","_et_gb_content_width":"","_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[7,6],"tags":[],"class_list":["post-485","post","type-post","status-publish","format-standard","hentry","category-accounting","category-techupdates"],"jetpack_featured_media_url":"","jetpack_sharing_enabled":true,"_links":{"self":[{"href":"http:\/\/ehluar.com\/main\/wp-json\/wp\/v2\/posts\/485","targetHints":{"allow":["GET"]}}],"collection":[{"href":"http:\/\/ehluar.com\/main\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"http:\/\/ehluar.com\/main\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"http:\/\/ehluar.com\/main\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"http:\/\/ehluar.com\/main\/wp-json\/wp\/v2\/comments?post=485"}],"version-history":[{"count":3,"href":"http:\/\/ehluar.com\/main\/wp-json\/wp\/v2\/posts\/485\/revisions"}],"predecessor-version":[{"id":498,"href":"http:\/\/ehluar.com\/main\/wp-json\/wp\/v2\/posts\/485\/revisions\/498"}],"wp:attachment":[{"href":"http:\/\/ehluar.com\/main\/wp-json\/wp\/v2\/media?parent=485"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"http:\/\/ehluar.com\/main\/wp-json\/wp\/v2\/categories?post=485"},{"taxonomy":"post_tag","embeddable":true,"href":"http:\/\/ehluar.com\/main\/wp-json\/wp\/v2\/tags?post=485"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}