IFRS 15 – Presentation and Practical Issues
A summary of how to present contract assets and liabilities under IFRS 15, required disclosures, and common industry-specific challenges.
IFRS 15 – Presentation and Practical Issues
IFRS 15 specifies how to present a contract in the financial statements as either a contract asset or a contract liability, depending on the relationship between performance and payment, and outlines the required disclosures.
Presentation of Contract Assets and Liabilities
•If goods or services are transferred before payment is received, and the entity has fulfilled its performance obligations, the contract is considered an asset and reported as a receivable.
•If the entity has received payment but still owes goods or services to the customer, a contract liability is recognized.
Required Disclosures
1.The amount of revenue recognized from contracts with customers.
2.The balances of receivables, contract assets, and contract liabilities, including the remaining transaction price.
3.Information on the progress toward fulfilling performance obligations.
4.Significant judgments and changes in those judgments.
5.The amount of assets recognized related to the costs of obtaining or fulfilling a contract (e.g., acquisition costs, pre-contract costs, and setup costs).
Possible Issues
•In telecommunications, identifying separate performance obligations and allocating the transaction price.
•In manufacturing, frequent contract modifications such as price changes and schedule changes.
•In real estate construction, the risk of not completing the project on time.
•In software and technology companies, the need to separate performance obligations.
•Accurately accounting for contract modifications arising from implementation issues.
Pro Tip
Our accountants ensure that IFRS 15 and other related standards are applied correctly, transactions are recorded in compliance with IFRS, accounting, and tax laws, and advice is tailored to the specific operations of the business.
In the next article, we will present detailed industry-specific examples and calculation methods under IFRS.
Subscribe now to be the first to read the next article!
SubscribeRate this article
Related Articles
Corporate Income Tax Overview
A concise guide to corporate income tax rates, incentives, and the simplified regime for small, medium, and large enterprises in Mongolia.
IFRS 15 – Core Principles of Revenue Recognition
An overview of IFRS 15's purpose, related standards, the 5-step revenue recognition model, and accounting for contract costs.