This blog is written by Mr. Waqar Ul Mulk, Associate Audit and Assurance. Please read this blog and provide your valued comments.
IFRS 15 REVENUE
Recognition: An entity recognise revenue to depict the transfer of promised good or services to customer in amount that reflect consideration to which the entity expect to be entitled in exchange for those good or services.
IFRS 15 require an entity to recognise revenue by applying the steps .
- Identify contract with customer.
- Identify performance obligation.
- Determine transaction price.
- Allocate transaction price to performance obligation.
- Recognise revenue when performance obligation satisfied.
Identify contract with customer
The contract is agreement between two parties that create enforceable right and obligation. IFRS 15 apply to all contract met the following criteria.
- The parties to contract have approved it and committed to perform.
- Each party right to good or service transferred are identified
- The payment terms are identified
- The contract commercial substance
- It is probable that an entity will collect the consideration.
Identify performance obligation
Performance obligation is any good or services that contract promises to transfer to the customer.
Identify transaction price
Transaction price is the amount of consideration that entity expected to be entitled in exchange for transferring promised good or services to customer excluding amount collected on behalf of third parties.
Allocate transaction price to performance obligation
Transaction price allocated to each performance obligation in proportion to stand alone selling price at contract inception of each performance obligation.
Recognise revenue when performance obligation satisfied
A performance obligation is satisfied when the entity transfer a promised good or service to a customer.
Waqar Ul Mulk