Contract Costs-
Incremental costs of obtaining a contract are recognised IFRS 15- Revenue from contracts
as an asset if the entity expects to recover them Entity recognises revenue to depict the transfer
of promised goods or services to customers
Amortisation-
Amortised to P/L
If costs to fulfil a contract are not within the scope of
another standard, they should only be recognised as an
asset if: 5 Step approach:
Costs relate directly to contract Identify the contract with the customer- agreement between two
Costs generate or enhance resources or more parties/enforceable rights and obligations
Costs are expected to be recorded Parties have approved the contract
Identify each party’s rights
Identify payment terms
Recognise revenue when (or as) performance Commercial substance
obligation satisfied Probable that entity will collect consideration
A performance obligation is satisfied when entity
transfers a promised good or service
Strategic Business Identify performance obligation- promise to transfer
Transfer of control of a good/service (over time):
Reporting IFRS 15 Good or service that is distinct or
Simultaneously receives and consumes the
benefits Series of distinct goods or services that are
Performance creates or enhances an asset substantially the same
that customer controls
Satisfaction at a point in time:
Present right to payment
Legal title
Transferred physical possession Determine the transaction price
Significant risks and rewards of ownership Existence of a significant financing component
Accepted the asset Non-cash consideration
Consideration payable to customer
Variable consideration
Allocate transaction price to performance obligation
Multiple deliverables- transaction price Include any variable consideration in the transaction price.
allocated to each separate performance Measure at:
obligation in proportion to the stand-alone Probability-weighted expected value
selling price at contact inception of each Most likely amount
performance obligation
, Impairment of Assets (IAS 36) PPE (IAS 16)
If an asset’s value in the financial statements is higher Held by an entity for use in the production or supply of goods or
SBR
than its realistic value, measured as its ‘recoverable services
Non-Current Assets
amount’, the asset is judged to have suffered an Expected to be used during more than one period
impairment loss- should then be reduced by the Recognition:
impairment loss and written against profit. Probable that future economic benefits associated with the
Pro Forma item will flow to the entity
Evidence of impairment- internal or external Measured reliably
A B Eg Total Further guidance:
Annual impairment tests- for intangible assets & goodwill PPE x x x Smaller items are expensed as consumables
Goodwill x x x Large and complex assets- composite parts/depreciated
Measuring the recoverable amount/impairment test separately
Carrying amount > Recoverable amount = Impairment Test of Individual CGUs: Measurement at recognition:
A B @ Cost (Purchase price + DAC + Finance Costs)
Lower of Carrying amount x x
Recoverable amount x x Measurement after recognition:
Impairment loss x x Cost Model- Cost less accum. dpn. & impairment losses or
Recoverable amount Carrying amount Revaluation Model- revalued amount (FV) less subsequent accum.
(Higher of) Allocated to: dpn./impairment losses
Goodwill x x
Other assets x x Using FV hierarchy IRFS 13
Fair value less Value in Whole class of assets must be revalued
cost to sell use Test of group CGUs:
Derecognition:
Fair value less costs of disposal- price that would be Revised carrying amount x On disposal or when no future economic benefits are
received to sell the asset, less direct incremental costs Recoverable amount x expected from its use or disposal
Value in use- measured as the present value of estimated Impairment loss x Profit/Loss = Net proceeds – Carrying amount
future cash flows Revaluation surplus retained earnings
Allocated to:
Discount rate should be Pre-tax rate Unallocated goodwill x Exchange of assets:
Other assets (B) x Measured @ FV, unless lack of commercial substance or FV cannot
Cash Generating Units-not possible to estimate RA x be measured reliably
Smallest identifiable group of assets that generates cash
inflows Impairment loss against GW
first, reduces GW value in FS Link to framework – recognition
Allocating GW on non-arbitrary basis if nature/risk same
Corporate assets Remaining impairment goes
against other assets (eg PPE)
Incremental costs of obtaining a contract are recognised IFRS 15- Revenue from contracts
as an asset if the entity expects to recover them Entity recognises revenue to depict the transfer
of promised goods or services to customers
Amortisation-
Amortised to P/L
If costs to fulfil a contract are not within the scope of
another standard, they should only be recognised as an
asset if: 5 Step approach:
Costs relate directly to contract Identify the contract with the customer- agreement between two
Costs generate or enhance resources or more parties/enforceable rights and obligations
Costs are expected to be recorded Parties have approved the contract
Identify each party’s rights
Identify payment terms
Recognise revenue when (or as) performance Commercial substance
obligation satisfied Probable that entity will collect consideration
A performance obligation is satisfied when entity
transfers a promised good or service
Strategic Business Identify performance obligation- promise to transfer
Transfer of control of a good/service (over time):
Reporting IFRS 15 Good or service that is distinct or
Simultaneously receives and consumes the
benefits Series of distinct goods or services that are
Performance creates or enhances an asset substantially the same
that customer controls
Satisfaction at a point in time:
Present right to payment
Legal title
Transferred physical possession Determine the transaction price
Significant risks and rewards of ownership Existence of a significant financing component
Accepted the asset Non-cash consideration
Consideration payable to customer
Variable consideration
Allocate transaction price to performance obligation
Multiple deliverables- transaction price Include any variable consideration in the transaction price.
allocated to each separate performance Measure at:
obligation in proportion to the stand-alone Probability-weighted expected value
selling price at contact inception of each Most likely amount
performance obligation
, Impairment of Assets (IAS 36) PPE (IAS 16)
If an asset’s value in the financial statements is higher Held by an entity for use in the production or supply of goods or
SBR
than its realistic value, measured as its ‘recoverable services
Non-Current Assets
amount’, the asset is judged to have suffered an Expected to be used during more than one period
impairment loss- should then be reduced by the Recognition:
impairment loss and written against profit. Probable that future economic benefits associated with the
Pro Forma item will flow to the entity
Evidence of impairment- internal or external Measured reliably
A B Eg Total Further guidance:
Annual impairment tests- for intangible assets & goodwill PPE x x x Smaller items are expensed as consumables
Goodwill x x x Large and complex assets- composite parts/depreciated
Measuring the recoverable amount/impairment test separately
Carrying amount > Recoverable amount = Impairment Test of Individual CGUs: Measurement at recognition:
A B @ Cost (Purchase price + DAC + Finance Costs)
Lower of Carrying amount x x
Recoverable amount x x Measurement after recognition:
Impairment loss x x Cost Model- Cost less accum. dpn. & impairment losses or
Recoverable amount Carrying amount Revaluation Model- revalued amount (FV) less subsequent accum.
(Higher of) Allocated to: dpn./impairment losses
Goodwill x x
Other assets x x Using FV hierarchy IRFS 13
Fair value less Value in Whole class of assets must be revalued
cost to sell use Test of group CGUs:
Derecognition:
Fair value less costs of disposal- price that would be Revised carrying amount x On disposal or when no future economic benefits are
received to sell the asset, less direct incremental costs Recoverable amount x expected from its use or disposal
Value in use- measured as the present value of estimated Impairment loss x Profit/Loss = Net proceeds – Carrying amount
future cash flows Revaluation surplus retained earnings
Allocated to:
Discount rate should be Pre-tax rate Unallocated goodwill x Exchange of assets:
Other assets (B) x Measured @ FV, unless lack of commercial substance or FV cannot
Cash Generating Units-not possible to estimate RA x be measured reliably
Smallest identifiable group of assets that generates cash
inflows Impairment loss against GW
first, reduces GW value in FS Link to framework – recognition
Allocating GW on non-arbitrary basis if nature/risk same
Corporate assets Remaining impairment goes
against other assets (eg PPE)
