IFRS 15 Revenue from Contracts with Customers

IFRS 15 Revenue from Contracts with Customers was developed jointly by the IASB and the FASB (the Boards). The Standard applies to revenue from contracts with customers only.

Project history

On 24 June 2010, the Boards published their first exposure draft Revenue from Contracts with Customers for public comment. EFRAG's draft comment letter, comment letter and the results of EFRAG's outreach activities on this first exposure draft are available at the following project sites:

• ED Revenue from Contracts with Customers
• European Outreach on the IASB's main projects

In November 2011 the IASB published a revision of the 2010 exposure draft. This revised exposure draft is referred to as 'the ED' in the following.

The ED proposed a single revenue recognition model in which an entity recognises revenue as it satisfies a performance obligation by transferring control over a promised good or service to a customer. The ED proposed that a single revenue recognition model be applied consistently to various transactions in different industries .

The ED proposed that a new standard on accounting for revenue arising from contracts with customers would replace IAS 11 Construction Contracts, IAS 18 Revenue, IFRIC 13 Customer Loyalty Programmes, IFRIC 15 Agreements for the Construction of Real Estate, IFRIC 18 Transfers of Assets from Customers and SIC-31 Revenue-Barter Transactions Involving Advertising Services.

In January 2012 EFRAG published its draft comment letter in response to the ED.

From January to April 2012, EFRAG organised in co-operation with national standard setters field-tests of the ED. The feedback statements from these field-tests are available here.

In April 2012 EFRAG submitted its comment letter on the ED to the IASB.

In its comment letter, EFRAG welcomed the IASB's decision to re-expose the proposals and noted that significant concerns that were raised in EFRAG's comment letter in response to the 2010 ED had been addressed in the revised proposals. However, EFRAG still disagreed with the proposals to focus on the transfer of goods and services to a customer when recognising revenue.

EFRAG noted that one overall and significant concern that emerged from this second consultation was that some of the proposed requirements seemed difficult to understand and lacked the clarity necessary for consistent application. EFRAG therefore urged the IASB to ensure that the final requirements could be easily understood and implemented.

EFRAG was particularly concerned that the ED was unclear on whether or not recognition of revenue was always limited to amounts to which an entity would be reasonably assured to be entitled. In the view of EFRAG, revenue should always be limited to the amount to which the entity would be reasonably assured to be entitled.

EFRAG disagreed with the proposals in the ED to:  

apply the onerous test at the performance obligation level;

• limit the onerous test included in the ED to performance obligations satisfied over a period of time longer than one year;

• disregard the entity's customary practice of satisfying onerous performance obligations when measuring liabilities resulting from onerous performance obligations;

• include material subsequent changes in estimated credit losses in a line item adjacent to revenue;

• include a requirement to present, as a separate line item adjacent to revenue, the amounts of promised consideration that an entity assesses to be uncollectible because of customer credit risk;

• include a list of specific disclosure requirements in IAS 34 Interim Financial Reporting;

• include only sales-based variable consideration in the scope of paragraph 85 of the ED;

• restrict the allocation of contingent amounts of consideration to one or to all performance obligations within a contract; and

• require advances received to be offset against contract assets in all circumstances.

In addition EFRAG was concerned about the cost-benefit effectiveness of the proposed disclosures and for application of the proposed requirements for entities with certain types of contracts (for example, telecommunication companies).

On 28 May 2014 the IASB published the final Standard: IFRS 15 Revenue from Contracts with Customers. The effective date is 1 January 2017.

On 15 October 2014 EFRAG issued an Invitation to Comment relating to the endorsement of IFRS 15 for use in the European Union and European Economic Area. It was consulting both on its assessment of the Standard against the technical criteria for the endorsement in the EU and on its initial assessment of the costs and benefits that would arise from the implementation and application of the Standard in the EU. In relation to the latter issue, EFRAG specifically asked whether it will be possible to apply IFRS 15 by 1 January 2017.

EFRAG's initial assessment was that IFRS 15 satisfied the technical criteria for EU endorsement and EFRAG therefore recommends its endorsement.    

Comments were requested by 15 December 2014.  
   
On 17 March 2015 EFRAG submitted its Endorsement Advice relating to IFRS 15 for use in the European Union and European Economic Area. EFRAG assessed that IFRS 15 met all technical endorsement criteria of the IAS Regulation and was conducive to the European public good. It therefore recommended endorsement of IFRS 15.    

IFRS 15 was endorsed on 22 September 2016. The endorsement decision was published in the Official Journal of the European Union on 29 October 2016.