IFRS 15Chapter 5Lesson 2
Step 3: the significant financing component
Step 1 of 9Learning objectives
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When payment is clearly out of step with the transfer of the good or service, one party is financing the other. If this financing benefit is significant, the entity recognises revenue at the cash selling price and treats the difference as interest, presented separately from revenue. Three situations rule out a significant financing component, and a practical expedient removes the need to adjust when the expected delay is one year or less.
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Learning objectives
- Determine whether a contract contains a significant financing component, and recognise the situations where there is none.
- Apply the practical expedient when the expected period between transfer and payment is one year or less.
- Calculate the adjusted transaction price and the interest at the rate of a separate financing transaction.
- Record interest income or expense separately from revenue.