IFRS 15: Identifying a Contract

In April 2014, I got my first job as a subscription sales officer at one of the most selling local magazines at the time. The target was; three (3) subscribers per week. The objective was to have 5,000 subscribers by September 2015. At the time of onboarding, the company had an estimated 850 subscribers. We had a space of 5 months to close the deficit of 4,150! You know the excitement that comes with a first job. Here I was excited, at the same time afraid about the many needed subscribers. The job got me thinking about quitting on my first day! I was overwhelmed. I didn’t know where to start.

The next morning, I went straight to my supervisor’s office. “Excuse me, sir, your electronic communication dated 10th April 2014 refers.” How do you expect just the two of us in the subscription team to have grown such a big subscription base by September? You are asking too much of us, I said in a grieving tone.

“Young man, do you understand your role in the journey? I am not asking you to bring cash.” Said, my supervisor. “You have to visit office by office and ask them to fill the subscription form on the promise that payment would be made at a later date,” he added. “Have them commit to fulfilling their obligations under the contract,” he added. This reminded me of revenue from contracts with customers. This made my workload light.

Is your business model having similar characteristics? And that’s how IFRS 15 comes into the picture. You need to implement the standard today! IFRS 15 is a comprehensive standard covering revenue from contracts with customers. Paragraph B9 of the IFRS 15 standard provides states the characteristics under which a contract is accounted for under IFRS 15

  1. The parties to the contract have approved the contract and are committed to performing their obligations;
  2. the entity can identify each party’s rights regarding the goods or services to be transferred
  3. the entity can identify the payment terms for the goods or services to be transferred
  4. the contract has commercial substance (i.e. the risk, timing or amount of the entity’s future cash flows is expected to change as a result of the contract); and
  5. it is probable that the entity will collect the consideration to which it will be entitled in exchange for the goods or services that will be transferred to the customer.

Contact our summitIFRS team on ifrs9@summitcl.com to help ease your compliance with IFRS standards. Call Godfrey Ssenyonjo on +256 775845691 and get instant help

Share this

Leave a Comment

Chat with us
Chat with us
Questions, doubts, issues? We're here to help you!
Connecting...
None of our operators are available at the moment. Please, try again later.
Our operators are busy. Please try again later
:
:
:

The data collected by this form is used to get in touch with you. For more information, please check out our privacy policy
Have you got question? Write to us!
:
:

The data collected by the chat form is used to get in touch with you. For more information, please check out our privacy policy
This chat session has ended
Was this conversation useful? Vote this chat session.
Good Bad
Scroll to Top