PFRS15

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Agenda
PFRS 15: Revenue from
Contracts with
Customers Part I The Basics
1) 5-Step model
Part II In depth
1) Examine some of the key principles in IFRS 15 in more detail
Topic Deep dive

Performance obligations Performance obligations, Distinct in the
context in the contract
Contract modification
Material rights
Point in time v. overtime Right to payment
Measures of progress
Variable consideration The mechanics
2) Discuss examples and how they affect a variety of industries

2015 PFRS Update Training | PFRS 15: Revenue from Contracts with Customers 16 November 2016
3) Share experiences and potential issues
Isla Lipana & Co., PwC member firm Slide2
Part I The Basics PFRS 15 - Project objective
Effective for annual periods beginning on or after 1 January 2017
One Model
A single, joint revenue standard to be
applied across all industries and
capital markets
Comparability
Clear Robust Enhanced Simplified
across
principles framework industries disclosures guidance
2015 PFRS Update Training | PFRS 15: Revenue from Contracts with Customers 16 November 2016 2015 PFRS Update Training | PFRS 15: Revenue from Contracts with Customers 16 November 2016
Isla Lipana & Co., PwC member firm Slide3 Isla Lipana & Co., PwC member firm Slide4
1
A change in mindset PFRS 15 - Revenue recognition model
Reassessment of contracts will be time consuming PAS 18 /11 PFRS 15

Greatest impact for those that use industry based models
Separate models for: Single model for
Transaction price allocated on a relative selling price basis
Construction contracts performance obligations:
Change to model for variable consideration
Goods Satisfied over time
Full retrospective application may require running dual systems and gathering of Services Satisfied at a point in time
historic data
More extensive disclosure requirements Focus on risk and rewards Focus on control
Potential impact on compensation arrangements
Limited guidance on: More guidance:

Separating elements, allocating the
Awareness is essential! Multiple element
transaction price, variable
arrangements
consideration, licences, options,
Variable consideration repurchase arrangements
Licences and so on.
Scope The 5-step model
Revenue is income from ordinary activities. Core principle

Revenue recognised to depict transfer of goods or services
A contract has rights and obligations between two or more parties.
Step 1 - Identify the contract with the customer
A customer receives a good or service.

Step 2 - Identify the performance obligations in the contract
Scope exclusions
- Leases, insurance, financial instruments, certain guarantee contracts and certain Step 3 - Determine the transaction price
nonmonetary exchanges
Contracts with elements in multiple standards Step 4 - Allocate the transaction price
- Evaluate under other standards first
Step 5 - Recognise revenue when (or as) a performance obligation is satisfied
2
Revenue recognition model Revenue recognition model a simple example
Step 1 -Identify
Signed contract
the contract
exists
with the customer
A simple example.
Contract: Entity A sells products X, Y and Z to Customer B Step 2 - Identify the performance obligations in the contract
Transaction price: CU18m, 50% upfront, 50% when all three delivered Contract
Stand alone price: Each sold separately for CU8m each
Step 3An agreement
- Determine thebetween twoprice
transaction or more parties that creates
Nature of products: enforceable rights and obligations (not necessarily written)
- Product X: Good, control transferred at a point in time
Approved Commercial substance
- Product Y: Good, control transferred at a point in time
- Service Z: Service transferred over one year Step 4 Rights of the
- Allocate each party identified
transaction price Collectibility
Payment terms identified

Revenue recognition model a simple example Revenue recognition model a simple example
1
Step 2 Signed contract
Customer B canexists
benefit from X, Y and Z separately as they are sold Step 3
Step 1 Signed contract exists
The transaction price is fixed at CU18m.
separately three separate performance obligations
Step 2 Customer
Transaction priceB=can benefit from
Amount X, Y and
to which Z separately
entity expects as
tothey are sold
be entitled
separately inthree separate
exchange forperformance
transferringobligations
goods or services
Performance obligation:
Step 3 - Determine the transaction price Step 3 - Determine the transaction price Highly probable?
A promise in a contract with a customer to Subject to significant
transfer a good or service to the customer reversal?
and
Step 4 - Allocate the transaction price
Distinct Step 4 - Allocate the transaction price
Implicit Explicit Written Verbal

Step 5 - Recognise revenue when (or as) a performance obligation is satisfied Step 5 - Recognise revenue when (or as) a performance obligation is satisfied
3
Revenue recognition model a simple example Revenue recognition model a simple example
Step 41
Step 25% discount
Signed is allocated
contract exists evenly Total stand alone price =CU24m Step
Step 51CU6m
Signed contract
each existswhen control of X / Y transfers
= recognise
across X, Y, Z Total transaction price = CU18m
CU6m = recognise over the period that Z is provided
Total discount = 25%
Step 2 Customer B can benefit from Discount
X, Y and*Zstand-alone
separately=as they are
CU6msold Step 2 Customer B can benefit from X, Y and Z separately as they are sold
separately - three separate performance obligations separately
Yes- three separatereceives
Customer performance
benefits obligations
as performed/another
entity would not need to re-perform
e.g. cleaning service, shipping
Observable
Step 3 The transaction price of good at
is fixed or CU18m.
service that is sold separately Step 3 The transaction price is fixed at CU18m.
1 No
Point in time
Over time
Relative Step 4 Yes
25% discount is allocatedan asset
Create/enhance Total stand controls
customer alone price = CU24m
Estimate selling prices if not observable
stand-alone evenly across X, Y, Z e.g. house on customers land
Total transaction price = CU18m
Adjusted
Step 4 - Allocate market assessment
the transaction price approach or expected cost plus margin
2 approach selling price Total discount = 25%
No
Discount * stand-alone = CU6m
Residual approach Does not create asset w/alternative use

Yes and No
Only when selling price is highly variable or uncertain (different to
3 current residual method) Right to payment for work to date
Step 5 - Recognise revenue when (or as) a performance obligation is satisfied Step 5 - Recognise revenue when (or as) a performance obligation is satisfied
e.g. manufacturing service
Revenue recognition model a simple example Exercise - Temperature test
If not over time, then point in time. Instructions:
Recognise revenue when control transfers In table groups read scenarios in handout PFRS 15.1.1
Answer all multiple choice questions.
Indicators that customer has obtained control of a good or service:
You have 5 minutes
Customer has significant Customer has accepted

risk and rewards the asset
Objective
Legal title to asset
Answer multiple choice questions in each scenario.
Physical possession of
Right to payment for asset
asset
4
Step 1
Temperature test: Exercise Debrief Temperature test: Exercise Debrief Collectibility criterion to
determine if contract
Step 1: Identify the contract Step 1: Identify the contract exists
Scenario 1
What is the
appropriate
Record deposit liabilities initially and treatment then?
continue to re-assess whether a
Entity C contract with a customer is
established subsequently Contract
Initial payment: CU10,000 Recognise revenue only if the
Deferred payment: CU990,000 consideration received is non-
Approved Commercial substance
refundable and when:
Rights of each party identified Collectibility
How much revenue is recognised when Entity C transfers legal title of the o either there is no remaining
land? Payment terms identified
obligations to transfer goods or
A. CU1,000,000, full contract amount services to the customer;
B. CU10,000, non-refundable amount o or the contract has been

terminated
C. Nil, there is no contract with the customer
Step 2
Distinct considered
Temperature test: Exercise Debrief Temperature test: Exercise Debrief from the perspective of
Step 2: Identify the performance obligations Step 2: Identify the performance obligations the customer
Scenario 2
Can the customer benefit

from the goods or services
transferred on their own?
Entity E Customer F
Distinct Performance
Obligations
$
How many performance obligations exist in this agreement? Is the promise separately
identifiable from other
A. One promises?
B. Two
C. Many
5
Step 3
Temperature test: Exercise Debrief Temperature test: Exercise Debrief New model for variable
consideration and
Step 3: Calculate the transaction price Step 3: Calculate the transaction price financing
Scenario 3
Measured reliably?
Variable
IAS 11 / 18 Sufficiently advanced that performance
consideration is probable to meet [IAS 11]?
Contract What is the transaction price?
A. CU1,000,000
Expected construction Highly probable?
B. CU1,025,000 IFRS 15
period................. 5 years Not subject to significant reversal?
C. CU1,610,510
Full payment CU1 million D. CU1,635,500
Prepayment is non-financial liability

Financing IAS 11 / 18 Time value of money only considered

5% bonus based on operating for deferred payments
target
Need to determine if significant
IFRS 15 financing component exists
Step 4
Temperature test: Debrief Temperature test: Exercise Debrief Based on relative stand-
alone selling price but
Step 4: Allocate the transaction price Step 4: Allocate the transaction price more guidance provided
Scenario 4
CU1,000 CU1,000
Phone Phone
CU300 CU300
20% CU800 20% CU800
Tablet Discount Tablet Discount
CU400 CU400
Airtime Airtime
CU300 CU300
Phone/airtime CU400
Tablet CU400
How should the transaction price of CU800 be allocated? Phone and airtime regularly sold
together for CU400
A. Phone: CU240, Airtime: CU240, Tablet: CU320
B. Phone: CU200, Airtime: CU200, Tablet: CU400
6
Step 5
Single model for all
Temperature test: Exercise Debrief Temperature test: Exercise Debrief performance obligations
Step 5: Recognise revenue Step 5: Recognise revenue criteria to determine over
time
Scenario 5
Point in time
Entity H Customer I
IFRS
IAS 18
15 Exclusive
CU10
million
How much revenue should Entity H recognise for the work performed to
date?
Over time
A. CU2,000,000
B. CU5,000,000
Temperature test: Exercise Debrief Part II In depth

Step 5: Recognise revenue
Good or service transfers over time if one of the follow criteria met:
Does not create asset

Customer receive benefits
w/alternative use
as performed/another Create/enhance an asset
AND
would not need to re- customer controls
right to payment for work
perform
to date
If criteria not met, transfers at a point in time based on following indicators
Right to payment Customer has

for asset accepted the asset
Customer has
Physical possession
significant risk and
of asset
2015 PFRS Update Training | PFRS 15: Revenue from Contracts with Customers
rewards 16 November 2016 2015 PFRS Update Training | PFRS 15: Revenue from Contracts with Customers 16 November 2016
7
Deep dive: performance obligations Deep dive: performance obligations - Exercise
Performance obligation if: Instructions:

Distinct good or service: In table groups read scenarios in handout PFRS15.2.1
- customer benefits from good/service on its own or with other readily available
Answer all multiple choice questions.
resources; and
- separately identifiable from other items in the contract You have 5 minutes
Series of goods/services, if consistent pattern of transfer over time
In practice.
Objective
Individual Group of
Series of distinct
distinct inseparable
services
good or service goods or service
Answer multiple choice and any follow-up questions in each scenario.
e.g. construction of a e.g. daily cleaning
e.g. consumer good
building service
Deep dive: performance obligations Debrief Deep dive: performance obligations Debrief
Bundled package Prison design & constructions
Scenario 1 Scenario 2
5
4
1
How
To bemany
DISTINCT
performance
Criterion
obligations
a) whether customers
are included
can benefit
in the bundled
from particular
package
goods or
services upon
offered by Entity
transfer
T?
A. Five How
To
How beabout
many
DISTINCT
when
performance
Entity
Criterion
J only
obligations
acts
b) whether
as a project
does
the promises
coordinator
Entity are
J have
and
separately
individual
in theidentifiable
contract
subcontractors
with
to each
others
are
Government
directly responsible
G? to Government G? What is the potential implication?
KeySix
B. judgment areas:
A. One
Can
C. Seven
the customer benefit from the product on its own? Principal v. agent
B. Five
Activation required special arrangements and potential integration?
8
Deep dive: performance obligations Debrief Deep dive: performance obligations Debrief
DeathStar Communications Distinct in the context of the contract
Scenario 3
How many performance obligations? Factors that indicate good or service is separately identifiable include:
A. Four
1. Equipment and basic software entity does not provide a significant service of integrating the good or service with
B. Five 2. Installation other goods or services into a bundle that represent the combined output
3. Maintenance package
C. Six 4. Design good or service does not significantly modify or customise another good or service
promised in the contract
D. Seven
Why? 5. Material right to buy application software
Equipment and basic software are integrated good or service is not highly dependent on, or highly interrelated with, other goods or
services promised in the contract
Installation not integrated, could be performed by the customer or another third party
Maintenance not sold separately, but customer can benefit from maintenance with other resources
available to the customer
- hardware/software could be separate, combined as equipment/software combined
Judgment
required
Design services sold separately
Options could represent a material right
Distinct PO? Focus on POs: Why does it matter?

Contract terms One or more
POs? Construction Co. contracts with Developer to build 1oo houses on Developers land for
C1,000,000
BiotechCo exclusively licences a compound to PharmaCo.
BiotechCo is contractually obliged to provide research services for More All houses are constructed based on one of three designs provided by Developer
2 years. PharmaCo can switch suppliers after 2 years. Developer manages the overall development including other contractors on site for the
plumbing, electrical and other infrastructure work
Manufacturer sells cars to Dealer.
Manufacturer offers free maintenance services to any customer. More How is revenue recognised.
that purchases the vehicle from the Dealer.
Asset manager enters into a contract to provide services for 5 years. If one PO.recognise revenue over time, cost plus reasonable margin
Customer pays an activation fee before the service period begins. One
If multiple POs.recognise revenue over time, cost plus reasonable margin
OilCo sells 1m barrels of oil. Control passes at shipping point
Customer requests that OilCos transport division ships oil. More
Customer can change the delivery location any time after shipping. Why does it matter?
What happens if 10 more houses are added? A contract modification.
ConstructionCo contracts with Developer to build 1oo houses.
Developer manages the overall development including other ?
contractors on site for the plumbing and electrical work.
9
Contract modifications Contract modifications
Accounting when enforceable rights and obligations are created or changed Each house is a separate performance obligation
Accounting depends on whether distinct goods or services added 10 new houses stand-alone selling price
Modification adds additional Modification adds additional

Modification is a new Modification is a new
distinct performance distinct performance
contract contract
obligations priced at their obligations priced at their
(Prospective) (Prospective)
stand alone selling price stand alone selling price
At modification date, At modification date,
Treat the old contract as Treat the old contract as
remaining performance remaining performance
cancelled. Remaining and cancelled, Remaining and
obligations are distinct from obligations are distinct from
new performance new performance
those already transferred, but those already transferred, but
obligations as new contract 10 new houses treated obligations as new contract
not priced at stand alone not priced at as new contract
stand alone
selling price selling price
Additional consideration allocated to 1o performance obligations
At the modification date, Allocated transaction price could be different than amounts allocated in initial
Adjust revenue at the date
remaining performance
of the modification on a contractAt if the
stand modification
alone selling price date,changed Adjust revenue at the date
obligations are NOT distinct remaining performance of the modification on a
cumulative catch-up basis obligations NOT distinct from cumulative catch-up basis
from those already
(Retrospective) those already transferred (Retrospective) 16 November 2016
transferred
2015 PFRS Update Training | PFRS 15: Revenue from Contracts with Customers 16 November 2016 2015 PFRS Update Training | PFRS 15: Revenue from Contracts with Customers
10 new houses added at below market price at time of modification 10 new houses added at below market price at time of modification
Each house is a separate performance obligation All 110 houses treated as single performance obligation
50 houses completed to date 50 houses completed to date
Modification adds additional Modification adds additional

Modification is a new Modification is a new
distinct performance distinct performance
contract contract
obligations priced at their obligations priced at their
stand alone selling price stand alone selling price
At modification date, At modification date,

Treat the old contract as Treat the old contract as
10 new remaining
houses plus 50performance
remaining houses treated as new contract
cancelled, Remaining and remaining performance
obligations are distinct from
Remaining consideration plus additional new performance Cost obligations
plus method used to recognise
are distinct fromrevenue cancelled, Remaining and
those already transferred, but consideration allocated to 60 remaining those already
new performance
performance obligations obligations as new contract Cumulative catch uptransferred,
recorded whenbutmodification occurs as new contract
obligations
not priced at stand alone not priced at stand alone
(Prospective) Benefit of an increased margin taken immediately for(Prospective)
portion completed
Discount is allocated
sellingacross
price60 remaining performance obligations selling price
At the modification date, Adjust revenue at the date
remaining performance of the modification on a At theDifferent
modification date, if treated
accounting Adjust
as arevenue at the date
single PO
obligations NOT distinct from cumulative catch-up basis remaining performance of the modification on a
those already transferred
(Retrospective) 16 November 2016 obligations
2015 PFRS Update Training | PFRSNOT distinct
15: Revenue from
from Contracts with Customerscumulative catch-up basis16 November 2016
Isla Lipana & Co., PwC member firm Slide39 Isla Lipana & Co., those
PwC memberalready
firm transferred (Retrospective) Slide40
10
Change to scope or price?
10 new houses added at below stand-alone selling price for 10 house
Contract extensions
All 110 houses treated as series a single performance obligation
50 houses completed to date Additional goods and services Construction
Change orders and real estate
Modification adds additional
Modification is a new
distinct performance
contract Who else might be affected?
obligations priced at their
(Prospective)
stand alone selling price
At modification date,
Treat the old contract as
remaining performance
cancelled, Remaining and Power and
obligations
Same answer distinct
as if 100 from
separate performance obligations Communications
new performance utilities
those already transferred, but
60 remaining houseatcould be alone
distinct obligations as new contra
not priced stand Outsourcing
(Prospective)ct
selling price
Technology and
At the modification date, Adjust revenue at the date Aerospace and
software
remaining performance of the modification on a defence
obligations NOT distinct from
cumulative catch-up basis 2015 PFRS Update Training | PFRS 15: Revenue from Contracts with Customers
16 November 2016 16 November 2016
Isla Lipana & Co., those already
PwC member firm transferred (Retrospective) Slide41 Isla Lipana & Co., PwC member firm Slide42
Deep dive: material rights Deep dive: material rights Debrief

Customer options for additional goods or services Customer loyalty programme
What are potential customer options? Scenario 4
Customer loyalty programme

Extended warranty options
Renewal options, etc. Loyalty 10 times =
points
Estimate the
standalone selling How should Entity K determine the accounting for this customer loyalty
price of the option programme?
Material If YES, then and allocate a
right? portion of the sale A. Entity K shall disregard the loyalty points earned by customer each time given it is not
price to it material individually.
B. Entity K shall separately account for the loyalty points and recognise related revenue
only when a customer redeems the points and takes the free flight.
11
Deep dive: material rights Debrief Performance obligations
Customer loyalty programme
Accounting challenges Transition challenges

Material rights existed consideration of whole arrangement
Performance obligations are the IT systems information needs
Accounting implication building blocks of the model at performance obligation level
Dr. Trade receivables <B/S> xx
Assess from the perspective of Sales need to understand the
Cr. Revenue <P/L> (xx) the customer sales pitch to customers
Cr. Deferred revenue <B/S> (xx)
Significant judgment required Other considerations
Other complexities? and disclosed compensation plans, messaging
to investors, etc.
Step 5 Point in time or over time Recap: point in time versus over time
Good or service transfers over time if one of the follow criteria met:
Core principle
Does not create asset
Revenue recognised to depict transfer of goods or services Customer receives benefit
Create/enhance an asset w/alternative use
as entity performs/another
customer controls AND
entity would not need to re-
Step 1 - Identify the contract with the customer e.g. house on customer land right to payment
perform
e.g. specialised good with
e.g. cleaning service
right to payment
If criteria not met, transfers at a point in time based on following indicators
Step 3 - Determine the transaction price
Right to payment Customer has
for asset accepted the asset
Physical Customer has
Step 5 - Recognise revenue when (or as) a performance obligation is satisfied possession of significant risk
asset and rewards
12
Point in time or over time Alternative use/right to payment
Must have both.
True OR False
All construction contracts in the scope of IAS 11 are accounted as over time under the Entity is unable contractually or practically
guidance in IFRS 15. to readily direct for another use
No alternative use
e.g., cannot contractually sell to another
In many casesbut not all customer
IAS 11 - scope IFRS 15 para 35
Customer controls WIP Compensation for performance completed

Specifically negotiated for the or Right to payment to date approximates the selling price
construction of an asset Right to payment/no alternative for performance to date e.g., recovery of the costs plus a reasonable
use profit margin
If customer does not control the WIPneed right to payment

Point in time/over time Exercise point in time/over time

Debrief
Instructions: PO PIT or OT When or how?

In table groups, read exercise 1 on handout PFRS15.2.2 Equipment/software PIT Delivery at warehouse
Assess whether performance obligations are satisfied at a point in time or over time Installation ? When or as installed
Maintenance OT Time based?
Network design services OT Input method
Material right PIT When exercised, consider breakage
Objective
Why?
Software transfers before equipment, but no revenue until entire PO satisfied
Formal customer acceptance only an indicator, does not always delay recognition
Time based recognition still appropriate for stand-ready obligations, but
Determine whether performance obligations are satisfied at a point in time or over
- need to consider whether (1) pattern reflects transfer to customer (2) there are distinct
time
POs (e.g. separately identifiable upgrades)
Cost plus might still be acceptable method to estimate progress
13
Measure of progress Focus on PIT/OT: Manufacturing
Recognise revenue over time by measuring the progress towards complete

satisfaction of that performance obligation
Scenario
Output or input methods acceptable, but. Manufacturer enters into contract to build customised furniture.
- select method that best reflects transfer to the customer Service is a single performance obligation. Each item meets the over time criteria as
- maximise use of observable inputs the product has no alternative use and Manufacturer has a right to payment.
- exception for uninstalled materials, revenue up to cost incurred Customer takes legal title to the furniture upon delivery. Customer has a return right if
the furniture does not meet agreed specifications.
Output Input
Which of the following could be an appropriate pattern of recognition?
Direct measure of value to customer Based on entitys efforts
surveys or appraisals costs incurred A: Output method based on units delivered
milestones resources consumed
time elapsed labour hours expended B: Manufacturing cost plus estimated margin
units produced
If a PO over time, measure of progress to reflect manufacturing service
Only direct costs that depict transfer
excludes set up costs, admin costs, wasted Units delivered not likely an appropriate measure of progress for a
materials, etc manufacturing service work in progress
Measure of progress Point in time/over time
Key judgements Manufacturing
Cost plus or output which is more reliable?

Accounting Transition
Indexed pricing, declining price per unit New model some traditional Systems to measure progress
Effect of learning curve? goods might be seen as where service performed
manufacturing services
Stand ready obligations
Sales and legal do they
Uninstalled materials Judgment required to determine understand implication of
if right to payment exists contract terms?
Who else might be affected?

Aerospace and More guidance on measure of Compensation plans do they
defence progress match revenue?
Technology and
Outsourcing
software
Power and
Construction utilities
and real estate
14
Step 3 Variable consideration Variable consideration
Use expected value or most likely amount

Core principle
Revenue recognised to depict transfer of goods or services
Included in the transaction price only if highly probable that there will not be a
significant revenue reversal
Step 1 - Identify the contract with the customer
Susceptible to
Uncertainty over Limited experience Broad range of prices
factors outside
Step 2 - Identify the performance obligations in the contract long period of time with similar contracts / outcomes
control
Step 3 - Determine the transaction price
Key effects
Must recognise minimum amount highly probable of not reversing
Reassessed at the end of each reporting period
Variable consideration Variable consideration group exercise

Debrief
Instructions:
What is the transaction price?
In table groups, read exercise 2 on handout PFRS15.2.2
A. CU1,165
Determine the transaction price for the arrangement Hardware + software + installation: CU1,000
B. CU1,175 b
Design services: CU115
C. CU1,245 Maintenance service: CU60
D. CU1,255
Objective
Why?
Highly probable that revenue related to performance bonus will not reverse
Maintenance service for 5 years; if cancellable, renewal option could indicate a material
Determine the transaction price for the arrangement right
Total transaction price needs to be allocated to the each different PO

15
Variable consideration Variable consideration
Who else might be affected?

Accounting Transition
Nearly every industry!
New model requires Controls and process over
Variable consideration captures discounts, returns, rebates, liquidated reassessment of the minimum estimation, opportunity to
damages.etc. automate manual processes
More estimation required, key
judgment will require disclosure Compensation plans will they
Even if no change to the accountingfocus on disclosures match revenue?
- significant payment terms, obligations for returns, refunds
Communication to investors
- inputs, methods, and assumptions used to determine the transaction price, allocate
about changes to timing of
and assess whether variable consideration is constrained
recognition
- how management determines the minimum amount of revenue not subject to the
variable consideration constraint
Recap More challenges are coming
Change in mindset
Accounting model has changed Uh oh.this is

identifying performance obligations is fundamental to applying the model, effects not going to be
more than just timing of recognition easy
pattern of recognition for services key judgement for over time POs; might be
different than invoiced amount
new model for variable consideration more estimation required
Dont forget systems, controls and business impact
16
Questions? Thank you.
?
Isla Lipana & Co., PwC member firm
16 November 2016
Slide65
This publication has been prepared for general guidance on matters of interest only, and does
not constitute professional advice. You should not act upon the information contained in this
publication without obtaining specific professional advice. No representation or warranty
(express or implied) is given as to the accuracy or completeness of the information contained
in this publication, and, to the extent permitted by law, [insert legal name of the PwC firm], its
members, employees and agents do not accept or assume any liability, responsibility or duty of
care for any consequences of you or anyone else acting, or refraining to act, in reliance on the
information contained in this publication or for any decision based on it.
2015 Isla Lipana & Co. All rights reserved. In this document, PwC refers to Isla Lipana &
Co. which is a member firm of PricewaterhouseCoopers International Limited, each member
firm of which is a separate legal entity.
17

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Topic Deep dive

2) Discuss examples and how they affect a variety of industries

Part I The Basics PFRS 15 - Project objective

Effective for annual periods beginning on or after 1 January 2017

Reassessment of contracts will be time consuming PAS 18 /11 PFRS 15

Limited guidance on: More guidance:

Scope The 5-step model

Revenue is income from ordinary activities. Core principle

A customer receives a good or service.

Step 5 - Recognise revenue when (or as) a performance obligation is satisfied

Implicit Explicit Written Verbal

Residual approach Does not create asset w/alternative use

Revenue recognition model a simple example Exercise - Temperature test

If not over time, then point in time. Instructions:

Customer has significant Customer has accepted

Legal title to asset

Answer multiple choice questions in each scenario.

B. CU10,000, non-refundable amount o or the contract has been

Can the customer benefit

Financing IAS 11 / 18 Time value of money only considered

Temperature test: Exercise Debrief Part II In depth

Does not create asset

If criteria not met, transfers at a point in time based on following indicators

Right to payment Customer has

Performance obligation if: Instructions:

Series of goods/services, if consistent pattern of transfer over time

Distinct PO? Focus on POs: Why does it matter?

Modification adds additional Modification adds additional

Contract modifications Contract modifications

Modification adds additional Modification adds additional

At modification date, At modification date,

Deep dive: material rights Deep dive: material rights Debrief

Customer loyalty programme

Accounting challenges Transition challenges

IAS 11 - scope IFRS 15 para 35

Customer controls WIP Compensation for performance completed

If customer does not control the WIPneed right to payment

Point in time/over time Exercise point in time/over time

Instructions: PO PIT or OT When or how?

Recognise revenue over time by measuring the progress towards complete

Measure of progress Point in time/over time

Key judgements Manufacturing

Cost plus or output which is more reliable?

Who else might be affected?

Use expected value or most likely amount

Step 3 - Determine the transaction price

Variable consideration Variable consideration group exercise

Total transaction price needs to be allocated to the each different PO

Who else might be affected?

Recap More challenges are coming

Accounting model has changed Uh oh.this is

Dont forget systems, controls and business impact

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