{"id":492,"date":"2017-12-31T07:08:44","date_gmt":"2017-12-30T23:08:44","guid":{"rendered":"http:\/\/ehluar.com\/main\/?p=492"},"modified":"2018-03-22T13:01:38","modified_gmt":"2018-03-22T05:01:38","slug":"revenue-the-5-step-model-of-new-revenue-standard-part-6","status":"publish","type":"post","link":"http:\/\/ehluar.com\/main\/2017\/12\/31\/revenue-the-5-step-model-of-new-revenue-standard-part-6\/","title":{"rendered":"Revenue – The 5-Step Model of New Revenue Standard (Part 6)"},"content":{"rendered":"

Step 5 Recognise revenue when performance obligation is satisfied<\/u><\/strong><\/p>\n

9.1 \u00a0 Step 5 is to determine the appropriate method of revenue recognition when (or as) the entity satisfies performance obligations at a point in time or over time.<\/p>\n

9.2 \u00a0 An entity shall recognise revenue when (or as) the entity satisfies a performance obligation<\/u> by transferring a promised good or service to a customer.\u00a0 A good or service is transferred when (or as) the customer obtains control of that good or service.<\/strong><\/p>\n

9.3 \u00a0 When (or as) a performance obligation is satisfied, an entity recognises as revenue the amount of the transaction price that is allocated to that performance obligation, this could occur over time<\/u> or at a point in time<\/u>.<\/p>\n

9.4 \u00a0 A performance obligation is satisfied at a point in time<\/u> when the entity satisfies the performance obligation (i.e. when the customer obtains control over the asset).<\/p>\n

9.5 \u00a0 A performance obligation is satisfied over time<\/u> by measuring the progress towards complete satisfaction of that performance obligation.\u00a0\u00a0 An entity transfers control of a good or service over time<\/u> when one<\/u> of the following criteria is met:<\/p>\n

– the customer simultaneously receives and consumes<\/u> the benefits provided by the entity\u2019s performance<\/p>\n

– the entity\u2019s performance creates or enhances an asset that the customer controls<\/u> as the asset is created or enhanced<\/p>\n

– the entity\u2019s performance does not<\/u> create an asset with an alternative use<\/u> to the entity, or<\/p>\n

– the entity has an enforceable right<\/u> to payment for performance completed to date.<\/p>\n

9.6\u00a0\u00a0 If the entity does not satisfy a performance obligation over time, the performance obligation is satisfied at a point in time.<\/p>\n

9.7 \u00a0 Transfer of control<\/u><\/strong><\/p>\n

(a)\u00a0\u00a0\u00a0\u00a0 Revenue is recognised in accordance with the pattern of transfer.<\/p>\n

(b)\u00a0\u00a0\u00a0\u00a0 Revenue that is allocated to performance obligations satisfied at a point in time<\/u> will be recognised when a customer obtains control of a promised asset. Indictors that a customer obtains control of a promised asset includes:<\/p>\n

(i)\u00a0\u00a0\u00a0\u00a0\u00a0 An entity has a present right to payment for the asset<\/p>\n

(ii)\u00a0\u00a0\u00a0\u00a0 The customer has legal title to the asset<\/p>\n

(iii)\u00a0\u00a0 The entity has transferred physical possession of the asset<\/p>\n

(iv)\u00a0\u00a0\u00a0 The customer has the risks and rewards of ownership of the asset<\/p>\n

(v)\u00a0\u00a0\u00a0\u00a0 The customer has accepted the asset.<\/p>\n

(c) \u00a0 If the performance obligation is satisfied over time<\/u>, the revenue allocated to that performance obligation will be recognised over the period the performance obligation is satisfied.<\/p>\n

(d)\u00a0\u00a0\u00a0\u00a0 Entities will need to adopt (and disclose) the method that best depicts the pattern of the transfer of control over time.<\/p>\n

(e)\u00a0\u00a0\u00a0\u00a0 Additional application guidance is provided to address when entities need to determine whether a licence of intellectual property transfers to a customer over time or at a point in time.<\/p>\n

9.8\u00a0\u00a0 Contract costs and other application guidance<\/p>\n

(a)\u00a0\u00a0\u00a0\u00a0 The standard also specifies how to account for the incremental costs of obtaining a contract and the costs directly related to fulfilling a contract. Provided those costs are expected to be recovered, they can be capitalised and subsequently amortised.<\/p>\n

(b)\u00a0\u00a0\u00a0\u00a0 Detailed application guidance is provided to assist entities in applying these requirements to common arrangements, including: licences; warranties; rights of return; principal-versus-agent considerations; options for additional goods or services and breakage.<\/p>\n

9.9\u00a0\u00a0 Disclosure<\/u><\/strong><\/p>\n

(a)\u00a0\u00a0\u00a0\u00a0 An entity is to disclose sufficient information to enable users of the financial statements to understand the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers.<\/p>\n

(b)\u00a0\u00a0\u00a0\u00a0 An entity should disclose both the qualitative and quantitative information about all of the following:<\/p>\n

(i)\u00a0\u00a0\u00a0\u00a0\u00a0 its contracts with customers;<\/p>\n

(ii)\u00a0\u00a0\u00a0\u00a0 the significant judgments, changes in the judgments, made in applying the guidance to those contracts; and<\/p>\n

(iii)\u00a0\u00a0 any assets recognised from the costs to obtain or fulfil a contract with a customer.<\/p>\n

(c)\u00a0\u00a0\u00a0\u00a0 An entity needs to consider the level of detail necessary to satisfy disclosure objective and how much emphasis to place on each of the requirements. An entity should aggregate or disaggregate disclosures to ensure that useful information is not obscured.<\/p>\n

(d)\u00a0\u00a0\u00a0\u00a0 To achieve the disclosure objective, the standard introduces additional disclosure requirements, including:<\/p>\n

(i)\u00a0\u00a0\u00a0\u00a0\u00a0 significant judgements made<\/p>\n

(ii)\u00a0\u00a0\u00a0\u00a0 disaggregation of revenue<\/p>\n

(iii)\u00a0\u00a0 information about contract balances<\/p>\n

(iv)\u00a0\u00a0\u00a0 how an entity satisfies its performance obligations<\/p>\n

(v)\u00a0\u00a0\u00a0\u00a0 information about remaining performance obligations<\/p>\n

(vi)\u00a0\u00a0\u00a0 significant payment terms<\/p>\n

(vii)\u00a0\u00a0 nature of the goods or services<\/p>\n

(viii) obligations for returns, refunds<\/p>\n

(ix)\u00a0\u00a0\u00a0 warranties and related obligations, etc.<\/p>\n

Last review: 31 December 2017<\/p>\n","protected":false},"excerpt":{"rendered":"

Step 5 Recognise revenue when performance obligation is satisfied 9.1 \u00a0 Step 5 is to determine the appropriate method of revenue recognition when (or as) the entity satisfies performance obligations at a point in time or over time. 9.2 \u00a0 An entity shall recognise revenue when (or as) the entity satisfies a performance obligation by […]<\/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-492","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\/492","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=492"}],"version-history":[{"count":2,"href":"http:\/\/ehluar.com\/main\/wp-json\/wp\/v2\/posts\/492\/revisions"}],"predecessor-version":[{"id":496,"href":"http:\/\/ehluar.com\/main\/wp-json\/wp\/v2\/posts\/492\/revisions\/496"}],"wp:attachment":[{"href":"http:\/\/ehluar.com\/main\/wp-json\/wp\/v2\/media?parent=492"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"http:\/\/ehluar.com\/main\/wp-json\/wp\/v2\/categories?post=492"},{"taxonomy":"post_tag","embeddable":true,"href":"http:\/\/ehluar.com\/main\/wp-json\/wp\/v2\/tags?post=492"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}