IFRS-15 for Finance Professionals and Students

The lecture gives the students a background of how IFRS-15 came into being. Beginning from the year 2001 when the seeds were first sown to 2018 when it became mandatory, the instructor narrates the story of the evolution of IFRS-15 touching upon the need for IFRS-15. With the help of practical examples, he explains the change that IFRS-15 has brought in Revenue Recognition in, at least, a few industries.

This lecture paves the way to understanding the 5-Step Model of Revenue Recognition under IFRS-15. The instructor dissects the title of the Standard - " Revenue from Contracts with the Customers" to cull out the intention, and meaning of each terminology used in the title. The instructor explains some important definitions that are very core to the Standard. He also gives a glimpse of the 5 steps in the model. 

A seemingly irrelevant step in the process of Revenue Recognition, the instructor dispels the belief and calls it the most important Step. The lecture is a deep dive into the meaning of Contracts vis a vis IFRS-15 and also touches upon subtle differences with Contracts under the Law. The lecture also explains the concepts of "Contract Modification" and "Combination of Contracts" using examples.

"Performance Obligation" is unarguably the most perplexing concept in IFRS-15. Often the term is misunderstood as "deliverable" under the contract. However, there is a vast difference. While both emanate from the Scope of Work under the Contract they are not the same. Performance Obligations are the promised goods and services for which the client has engaged the entity. The deliverable is everything (including e.g. a weekly progress report) that the entity is obliged to deliver to the client. Its may or may not embody "PO".   The instructor uses simple real-life scenarios to explain every element of this Idea. And also calls out how in the actual world identifying and tracking "Performance Obligations" poses a bigger threat application of IFRS-15 to the tee.

The lecture deals with the meaning of Transaction Price and how variable components of Consideration are reckoned in arriving at the same. The lecture also explains concepts like "Refund Liability" and "Significant Financing Component in a Contract". Using simple examples these intimidating jargons are made intelligible. 

In this lecture, the instructor explains how the Transaction Price, which was for the entire contract, is allocated between various Performance Obligations that were identified in the 2nd Step. While the core principle of the allocation remains "standalone selling price (SSP)" the determination of SSP is often a matter of individual judgment. The commentaries of the instructor give practical insights into dealing with situations where SSP is not available.

The lecture is the longest among the series of lectures on IFRS-15. Step 5 deals with Recognizing Revenue. It entails many important concepts. As per IFRS-15 Revenue is recognized when (or as) the entity satisfies Performance Obligations by transfer of promised goods or services to the customer.  So Revenue is recognized either "at a point in time" or "over time". Very intrinsic to the idea of the "transfer" of goods or services is "control". And it's really "control" that lies at the heart of Revenue Recognition. In the erstwhile Standards on Revenue Recognition, the focus was on "risk and reward". This is replaced by "control". The instructor has used many examples to explain the idea of "control" and when it's transferred.  This session also delves into the principles of  "Measurement of Progress of Complete Satisfaction of Performance Obligations". This is important if Revenue is to be recognized over time. The instructor gives his practical point of view in choosing and applying the method of measuring progress. The lecture also explains the accounting treatment of "Sale with a right to return"

This is the last lecture in the series of lectures. The question of Agent- Principal Relationship has always been a conundrum for most of the practicing Accountants. Often it's ignored or even exploited.  The conclusion of an Accountant on whether the entity is acting as a Principal or Agent with the Client has far-reaching implications on the measurement of Revenue. The situation is often dealt with by incorporating a clause in the contract declaring the relationship as a "Principal" or "Agent", as it suits the interest of the organization. Little do they know it makes no difference. For Revenue Recognition, the relationship is strictly governed by IFRS-15. The lecture not only explains the concept under IFRS 15 but also gives insights into the practical realities and differences between Law and Accounting Standards in the treatment of the concept.