Determining the transaction price

• Pricing terms of the contract (fixed price, discounts, rebates, bonuses, penalties, payment schedule)

  TextRequired

• Fixed consideration promised

  NumberRequired

  950,000

• Amounts collected on behalf of third parties (some sales taxes, for example)

  Number

• Possible outcomes of the variable consideration (one row per scenario; probabilities in percent, total 100)

  Table

  TIER_5 · PURCHASES_AT_LEAST_20000 · 0 · 30 | TIER_2 · PURCHASES_12000_TO_19999 · 30,000 · 50 | NO_REBATE · PURCHASES_BELOW_12000 · 50,000 · 20

  The scenarios and their probabilities are the entity's estimates based on reasonably available information (historical, current and forecast); the standard sets no probability (para. 54).

• Variable consideration included in the transaction price after the constraint

  Number

  0

  Amount retained after assessing the constraint (para. 56 and 57): at most the estimate calculated, and only the part for which a significant reversal of cumulative revenue is highly probable not to occur. This amount results from a documented judgement of the entity.

• Fair value of the non-cash consideration promised by the customer

  Number

• Consideration payable to the customer reducing the price (part that does not pay for a distinct good or service, or exceeds its fair value)

  Number

  40,000

• Promised consideration whose payment is not aligned with the transfer (nominal amount)

  Number

• Discount rate retained (rate of a separate financing transaction between the entity and the customer at inception, in %)

  Number

  The rate reflects the credit risk of the party financed and any collateral; it can be obtained by discounting the consideration to the cash selling price and is not updated afterwards (para. 64). The figure is a documented estimate of the entity, never set by the standard.

• Time between payment and transfer (number of annual periods)

  Number

• Cash selling price observed, where available (deferred payment)

  Number

• Interest for the period (opening financed balance × rate retained)

  Number

  Share for the period of the total interest calculated below; over the whole financing period, the sum of the interest of the periods equals that total. Interest is recognised only to the extent that a contract asset, a receivable or a contract liability is recognised (para. 65).

• Evidence obtained and referenced (category, document reference)

  EvidenceRequired

IFRS 15 §46IFRS 15 §47IFRS 15 §48IFRS 15 §49

• Components examined

  ChecklistRequired

  • Contract terms and customary business practices considered
  • Amounts collected on behalf of third parties excluded
  • Fixed consideration, variable consideration or both; effects of variable consideration, financing, non-cash consideration and consideration payable to the customer
  • Assumption: contract performed as agreed, neither cancelled, renewed nor modified
  • Estimates of variable consideration excluded by the constraint left out of the price

IFRS 15 §50IFRS 15 §51IFRS 15 §53IFRS 15 §54IFRS 15IFRS 15 §56IFRS 15 §57IFRS 15IFRS 15

• Analysis of the variable consideration

  Checklist

  • Forms identified (discounts, rebates, refunds, credits, price concessions, incentives, performance bonuses, penalties, right of return, bonus contingent on an event)
  • Method retained: the one that better predicts the amount (expected value or most likely amount)
  • Method applied consistently throughout the contract, using all reasonably available information
  • Consideration the entity expects to refund: refund liability, updated at each reporting date
  • Constraint: included only if it is highly probable that no significant reversal of cumulative revenue will occur; likelihood and magnitude examined
  • Sales-based or usage-based royalty for a licence: exception dealt with in “Specific arrangements”
  • Estimated transaction price and constraint updated at each reporting date

• Estimation method retained

  ChoiceRequired

  Expected value

  Expected value / Most likely amount / Not applicable: no variable consideration

  The choice between the expected value and the most likely amount is a judgement: the entity uses the method that better predicts the amount to which it will be entitled (para. 53). The constraint (para. 56 to 58) is applied afterwards to the estimate obtained.

IFRS 15 §60IFRS 15 §61IFRS 15 §62IFRS 15 §64IFRS 15 §65

• Financing factors examined

  Checklist

  • Difference between the promised consideration and the cash selling price
  • Combined effect of the expected time between transfer and payment and prevailing market interest rates
  • Explicit or implicit financing assessed in the light of all facts; revenue at the cash selling price
  • Cases without a significant component: advance payment with transfer at the customer's discretion, variable consideration outside the parties' control, difference explained by a reason other than financing
  • Interest income or expense presented separately from revenue from contracts with customers

IFRS 15 §66IFRS 15IFRS 15IFRS 15IFRS 15 §70IFRS 15 §71IFRS 15 §72

• Points examined

  Checklist

  • Non-cash consideration at fair value; if it cannot be reasonably estimated, by reference to the stand-alone selling price of the goods or services promised
  • Change in fair value for reasons other than the form of the consideration: constraint applies
  • Goods or services contributed by the customer to facilitate performance: non-cash consideration if the entity obtains control of them
  • Consideration payable to the customer as a reduction of the price, unless it pays for a distinct good or service (excess over fair value as a reduction)
  • Reduction of revenue at the later of recognition of the related revenue and payment or promise to pay

IFRS 15 §47IFRS 15 §53IFRS 15 §61IFRS 15 §64IFRS 15 §66IFRS 15 §70

• Estimate under the expected value (sum of probability-weighted amounts)

  Calculation

  25,000

  Possible outcomes of the variable consideration (one row per scenario; probabilities in percent, total 100)

• Estimate under the most likely amount (amount of the scenario with the highest probability)

  Calculation

  30,000

  Possible outcomes of the variable consideration (one row per scenario; probabilities in percent, total 100)

  Both estimates are shown for comparison; only the one under the method retained (para. 53) is subject to the constraint (para. 56 to 58) before inclusion in the price.

• Transaction price (fixed + variable included + non-cash − consideration payable to the customer − amounts for third parties)

  CalculationRequired

  910,000

  Fixed consideration promised ; Variable consideration included in the transaction price after the constraint ; Fair value of the non-cash consideration promised by the customer ; − Consideration payable to the customer reducing the price (part that does not pay for a distinct good or service, or exceeds its fair value) ; − Amounts collected on behalf of third parties (some sales taxes, for example)

  If the price includes a significant financing component, enter the fixed consideration at the cash selling price at the date of transfer (para. 61): for a deferred payment, this is the present value calculated below; for an advance received, it is the amount received plus interest at the rate retained up to transfer (teaching input assumption).

• Present value of the consideration entered (cash selling price for a deferred payment; amount received for an advance)

  Calculation

  Promised consideration whose payment is not aligned with the transfer (nominal amount) ; Discount rate retained (rate of a separate financing transaction between the entity and the customer at inception, in %) ; Time between payment and transfer (number of annual periods)

• Total interest over the financing period (nominal − present value)

  Calculation

  0

  Promised consideration whose payment is not aligned with the transfer (nominal amount) ; − Present value of the consideration entered (cash selling price for a deferred payment; amount received for an advance)

  Deferred payment: interest = nominal consideration − present value. Advance received: enter as promised consideration the cash selling price at transfer; the present value obtained is the amount received and the difference is the total interest expense (teaching input assumption).

• Interest expense on an advance received

  Entry

  Debit Interest expense ← Interest for the period (opening financed balance × rate retained) ; Credit Contract liability ← Interest for the period (opening financed balance × rate retained)

  To be used when the customer finances the entity through an advance: interest increases the contract liability and is presented separately from revenue (para. 65).

• Interest income on a deferred payment

  Entry

  Debit Receivable ← Interest for the period (opening financed balance × rate retained) ; Credit Interest income ← Interest for the period (opening financed balance × rate retained)

  To be used when the entity finances the customer through a deferred payment; only one of the two interest entries applies, depending on the direction of the financing retained.

IFRS 15 §53IFRS 15 §56IFRS 15 §57IFRS 15 §60IFRS 15 §61IFRS 15 §62

• Constraint on variable consideration

  JudgmentRequired

  Estimate entirely excluded from the price at this stage

  Estimate included in full: significant reversal highly improbable / Estimate partly included: only the part without risk of significant reversal / Estimate entirely excluded from the price at this stage / Not applicable: no variable consideration

  The standard sets no numerical threshold: the entity weighs the likelihood and magnitude of a reversal and the factors that increase that risk (para. 57). The amount retained is entered as variable consideration included.

• Rationale: facts relied on, analysis, alternative rejected

  TextRequired

• Significant financing component

  JudgmentRequired

  No significant financing component

  Significant component, deferred payment: the entity finances the customer (interest income) / Significant component, advance payment: the customer finances the entity (interest expense) / No significant financing component

• Rationale: facts relied on, analysis, alternative rejected

  TextRequired

• Impact by caption, derived from the entries above (the Notes line refers to the disclosures)

  TableRequired

• Paragraphs cited in this workpaper (verification status shown from the register)

  References

• The constraint is documentedPass
• The existence of a financing component is assessedPass
• The transaction price is determinedPass
• For a deferred payment, the present value agrees with the cash selling price observedNot evaluated
• The interest expense entry is balancedNot evaluated
• The interest income entry is balancedNot evaluated

Assets

0

Liabilities

0

Profit or loss

0

OCI

0

Equity

0

• Pricing terms of the contract (fixed price, discounts, rebates, bonuses, penalties, payment schedule)

  TextRequired

• Fixed consideration promised

  NumberRequired

  1,210,000

• Amounts collected on behalf of third parties (some sales taxes, for example)

  Number

• Possible outcomes of the variable consideration (one row per scenario; probabilities in percent, total 100)

  Table

  The scenarios and their probabilities are the entity's estimates based on reasonably available information (historical, current and forecast); the standard sets no probability (para. 54).

• Variable consideration included in the transaction price after the constraint

  Number

  Amount retained after assessing the constraint (para. 56 and 57): at most the estimate calculated, and only the part for which a significant reversal of cumulative revenue is highly probable not to occur. This amount results from a documented judgement of the entity.

• Fair value of the non-cash consideration promised by the customer

  Number

• Consideration payable to the customer reducing the price (part that does not pay for a distinct good or service, or exceeds its fair value)

  Number

• Promised consideration whose payment is not aligned with the transfer (nominal amount)

  Number

  1,210,000

• Discount rate retained (rate of a separate financing transaction between the entity and the customer at inception, in %)

  Number

  10 %

  The rate reflects the credit risk of the party financed and any collateral; it can be obtained by discounting the consideration to the cash selling price and is not updated afterwards (para. 64). The figure is a documented estimate of the entity, never set by the standard.

• Time between payment and transfer (number of annual periods)

  Number

  2 units

• Cash selling price observed, where available (deferred payment)

  Number

• Interest for the period (opening financed balance × rate retained)

  Number

  100,000

  Share for the period of the total interest calculated below; over the whole financing period, the sum of the interest of the periods equals that total. Interest is recognised only to the extent that a contract asset, a receivable or a contract liability is recognised (para. 65).

• Evidence obtained and referenced (category, document reference)

  EvidenceRequired

IFRS 15 §46IFRS 15 §47IFRS 15 §48IFRS 15 §49

• Components examined

  ChecklistRequired

  • Contract terms and customary business practices considered
  • Amounts collected on behalf of third parties excluded
  • Fixed consideration, variable consideration or both; effects of variable consideration, financing, non-cash consideration and consideration payable to the customer
  • Assumption: contract performed as agreed, neither cancelled, renewed nor modified
  • Estimates of variable consideration excluded by the constraint left out of the price

IFRS 15 §50IFRS 15 §51IFRS 15 §53IFRS 15 §54IFRS 15IFRS 15 §56IFRS 15 §57IFRS 15IFRS 15

• Analysis of the variable consideration

  Checklist

  • Forms identified (discounts, rebates, refunds, credits, price concessions, incentives, performance bonuses, penalties, right of return, bonus contingent on an event)
  • Method retained: the one that better predicts the amount (expected value or most likely amount)
  • Method applied consistently throughout the contract, using all reasonably available information
  • Consideration the entity expects to refund: refund liability, updated at each reporting date
  • Constraint: included only if it is highly probable that no significant reversal of cumulative revenue will occur; likelihood and magnitude examined
  • Sales-based or usage-based royalty for a licence: exception dealt with in “Specific arrangements”
  • Estimated transaction price and constraint updated at each reporting date

• Estimation method retained

  ChoiceRequired

  Not applicable: no variable consideration

  Expected value / Most likely amount / Not applicable: no variable consideration

  The choice between the expected value and the most likely amount is a judgement: the entity uses the method that better predicts the amount to which it will be entitled (para. 53). The constraint (para. 56 to 58) is applied afterwards to the estimate obtained.

IFRS 15 §60IFRS 15 §61IFRS 15 §62IFRS 15 §64IFRS 15 §65

• Financing factors examined

  Checklist

  • Difference between the promised consideration and the cash selling price
  • Combined effect of the expected time between transfer and payment and prevailing market interest rates
  • Explicit or implicit financing assessed in the light of all facts; revenue at the cash selling price
  • Cases without a significant component: advance payment with transfer at the customer's discretion, variable consideration outside the parties' control, difference explained by a reason other than financing
  • Interest income or expense presented separately from revenue from contracts with customers

IFRS 15 §66IFRS 15IFRS 15IFRS 15IFRS 15 §70IFRS 15 §71IFRS 15 §72

• Points examined

  Checklist

  • Non-cash consideration at fair value; if it cannot be reasonably estimated, by reference to the stand-alone selling price of the goods or services promised
  • Change in fair value for reasons other than the form of the consideration: constraint applies
  • Goods or services contributed by the customer to facilitate performance: non-cash consideration if the entity obtains control of them
  • Consideration payable to the customer as a reduction of the price, unless it pays for a distinct good or service (excess over fair value as a reduction)
  • Reduction of revenue at the later of recognition of the related revenue and payment or promise to pay

IFRS 15 §47IFRS 15 §53IFRS 15 §61IFRS 15 §64IFRS 15 §66IFRS 15 §70

• Estimate under the expected value (sum of probability-weighted amounts)

  Calculation

  Possible outcomes of the variable consideration (one row per scenario; probabilities in percent, total 100)

• Estimate under the most likely amount (amount of the scenario with the highest probability)

  Calculation

  Possible outcomes of the variable consideration (one row per scenario; probabilities in percent, total 100)

  Both estimates are shown for comparison; only the one under the method retained (para. 53) is subject to the constraint (para. 56 to 58) before inclusion in the price.

• Transaction price (fixed + variable included + non-cash − consideration payable to the customer − amounts for third parties)

  CalculationRequired

  1,210,000

  Fixed consideration promised ; Variable consideration included in the transaction price after the constraint ; Fair value of the non-cash consideration promised by the customer ; − Consideration payable to the customer reducing the price (part that does not pay for a distinct good or service, or exceeds its fair value) ; − Amounts collected on behalf of third parties (some sales taxes, for example)

  If the price includes a significant financing component, enter the fixed consideration at the cash selling price at the date of transfer (para. 61): for a deferred payment, this is the present value calculated below; for an advance received, it is the amount received plus interest at the rate retained up to transfer (teaching input assumption).

• Present value of the consideration entered (cash selling price for a deferred payment; amount received for an advance)

  Calculation

  1,000,000

  Promised consideration whose payment is not aligned with the transfer (nominal amount) ; Discount rate retained (rate of a separate financing transaction between the entity and the customer at inception, in %) ; Time between payment and transfer (number of annual periods)

• Total interest over the financing period (nominal − present value)

  Calculation

  210,000

  Promised consideration whose payment is not aligned with the transfer (nominal amount) ; − Present value of the consideration entered (cash selling price for a deferred payment; amount received for an advance)

  Deferred payment: interest = nominal consideration − present value. Advance received: enter as promised consideration the cash selling price at transfer; the present value obtained is the amount received and the difference is the total interest expense (teaching input assumption).

• Interest expense on an advance received

  Entry

  Account	Debit	Credit
  Interest expense	100,000
  Contract liability		100,000

  To be used when the customer finances the entity through an advance: interest increases the contract liability and is presented separately from revenue (para. 65).

• Interest income on a deferred payment

  Entry

  Account	Debit	Credit
  Receivable	100,000
  Interest income		100,000

  To be used when the entity finances the customer through a deferred payment; only one of the two interest entries applies, depending on the direction of the financing retained.

IFRS 15 §53IFRS 15 §56IFRS 15 §57IFRS 15 §60IFRS 15 §61IFRS 15 §62

• Constraint on variable consideration

  JudgmentRequired

  Not applicable: no variable consideration

  Estimate included in full: significant reversal highly improbable / Estimate partly included: only the part without risk of significant reversal / Estimate entirely excluded from the price at this stage / Not applicable: no variable consideration

  The standard sets no numerical threshold: the entity weighs the likelihood and magnitude of a reversal and the factors that increase that risk (para. 57). The amount retained is entered as variable consideration included.

• Rationale: facts relied on, analysis, alternative rejected

  TextRequired

• Significant financing component

  JudgmentRequired

  Significant component, advance payment: the customer finances the entity (interest expense)

  Significant component, deferred payment: the entity finances the customer (interest income) / Significant component, advance payment: the customer finances the entity (interest expense) / No significant financing component

• Rationale: facts relied on, analysis, alternative rejected

  TextRequired

• Impact by caption, derived from the entries above (the Notes line refers to the disclosures)

  TableRequired

• Paragraphs cited in this workpaper (verification status shown from the register)

  References

• The constraint is documentedPass
• The existence of a financing component is assessedPass
• The transaction price is determinedPass
• For a deferred payment, the present value agrees with the cash selling price observedNot evaluated
• The interest expense entry is balancedPass
• The interest income entry is balancedPass

Assets

100,000

Liabilities

100,000

Profit or loss

0

OCI

0

Equity

0

• Pricing terms of the contract (fixed price, discounts, rebates, bonuses, penalties, payment schedule)

  TextRequired

• Fixed consideration promised

  NumberRequired

  3,100,000

• Amounts collected on behalf of third parties (some sales taxes, for example)

  Number

• Possible outcomes of the variable consideration (one row per scenario; probabilities in percent, total 100)

  Table

  BONUS_EARNED · ACCEPTANCE_BY_31_MARCH_20X5 · 180,000 · 65 | NO_BONUS · LATER_ACCEPTANCE · 0 · 35

  The scenarios and their probabilities are the entity's estimates based on reasonably available information (historical, current and forecast); the standard sets no probability (para. 54).

• Variable consideration included in the transaction price after the constraint

  Number

  0

  Amount retained after assessing the constraint (para. 56 and 57): at most the estimate calculated, and only the part for which a significant reversal of cumulative revenue is highly probable not to occur. This amount results from a documented judgement of the entity.

• Fair value of the non-cash consideration promised by the customer

  Number

• Consideration payable to the customer reducing the price (part that does not pay for a distinct good or service, or exceeds its fair value)

  Number

• Promised consideration whose payment is not aligned with the transfer (nominal amount)

  Number

• Discount rate retained (rate of a separate financing transaction between the entity and the customer at inception, in %)

  Number

  The rate reflects the credit risk of the party financed and any collateral; it can be obtained by discounting the consideration to the cash selling price and is not updated afterwards (para. 64). The figure is a documented estimate of the entity, never set by the standard.

• Time between payment and transfer (number of annual periods)

  Number

• Cash selling price observed, where available (deferred payment)

  Number

• Interest for the period (opening financed balance × rate retained)

  Number

  Share for the period of the total interest calculated below; over the whole financing period, the sum of the interest of the periods equals that total. Interest is recognised only to the extent that a contract asset, a receivable or a contract liability is recognised (para. 65).

• Evidence obtained and referenced (category, document reference)

  EvidenceRequired

IFRS 15 §46IFRS 15 §47IFRS 15 §48IFRS 15 §49

• Components examined

  ChecklistRequired

  • Contract terms and customary business practices considered
  • Amounts collected on behalf of third parties excluded
  • Fixed consideration, variable consideration or both; effects of variable consideration, financing, non-cash consideration and consideration payable to the customer
  • Assumption: contract performed as agreed, neither cancelled, renewed nor modified
  • Estimates of variable consideration excluded by the constraint left out of the price

IFRS 15 §50IFRS 15 §51IFRS 15 §53IFRS 15 §54IFRS 15IFRS 15 §56IFRS 15 §57IFRS 15IFRS 15

• Analysis of the variable consideration

  Checklist

  • Forms identified (discounts, rebates, refunds, credits, price concessions, incentives, performance bonuses, penalties, right of return, bonus contingent on an event)
  • Method retained: the one that better predicts the amount (expected value or most likely amount)
  • Method applied consistently throughout the contract, using all reasonably available information
  • Consideration the entity expects to refund: refund liability, updated at each reporting date
  • Constraint: included only if it is highly probable that no significant reversal of cumulative revenue will occur; likelihood and magnitude examined
  • Sales-based or usage-based royalty for a licence: exception dealt with in “Specific arrangements”
  • Estimated transaction price and constraint updated at each reporting date

• Estimation method retained

  ChoiceRequired

  Most likely amount

  Expected value / Most likely amount / Not applicable: no variable consideration

  The choice between the expected value and the most likely amount is a judgement: the entity uses the method that better predicts the amount to which it will be entitled (para. 53). The constraint (para. 56 to 58) is applied afterwards to the estimate obtained.

IFRS 15 §60IFRS 15 §61IFRS 15 §62IFRS 15 §64IFRS 15 §65

• Financing factors examined

  Checklist

  • Difference between the promised consideration and the cash selling price
  • Combined effect of the expected time between transfer and payment and prevailing market interest rates
  • Explicit or implicit financing assessed in the light of all facts; revenue at the cash selling price
  • Cases without a significant component: advance payment with transfer at the customer's discretion, variable consideration outside the parties' control, difference explained by a reason other than financing
  • Interest income or expense presented separately from revenue from contracts with customers

IFRS 15 §66IFRS 15IFRS 15IFRS 15IFRS 15 §70IFRS 15 §71IFRS 15 §72

• Points examined

  Checklist

  • Non-cash consideration at fair value; if it cannot be reasonably estimated, by reference to the stand-alone selling price of the goods or services promised
  • Change in fair value for reasons other than the form of the consideration: constraint applies
  • Goods or services contributed by the customer to facilitate performance: non-cash consideration if the entity obtains control of them
  • Consideration payable to the customer as a reduction of the price, unless it pays for a distinct good or service (excess over fair value as a reduction)
  • Reduction of revenue at the later of recognition of the related revenue and payment or promise to pay

IFRS 15 §47IFRS 15 §53IFRS 15 §61IFRS 15 §64IFRS 15 §66IFRS 15 §70

• Estimate under the expected value (sum of probability-weighted amounts)

  Calculation

  117,000

  Possible outcomes of the variable consideration (one row per scenario; probabilities in percent, total 100)

• Estimate under the most likely amount (amount of the scenario with the highest probability)

  Calculation

  180,000

  Possible outcomes of the variable consideration (one row per scenario; probabilities in percent, total 100)

  Both estimates are shown for comparison; only the one under the method retained (para. 53) is subject to the constraint (para. 56 to 58) before inclusion in the price.

• Transaction price (fixed + variable included + non-cash − consideration payable to the customer − amounts for third parties)

  CalculationRequired

  3,100,000

  Fixed consideration promised ; Variable consideration included in the transaction price after the constraint ; Fair value of the non-cash consideration promised by the customer ; − Consideration payable to the customer reducing the price (part that does not pay for a distinct good or service, or exceeds its fair value) ; − Amounts collected on behalf of third parties (some sales taxes, for example)

  If the price includes a significant financing component, enter the fixed consideration at the cash selling price at the date of transfer (para. 61): for a deferred payment, this is the present value calculated below; for an advance received, it is the amount received plus interest at the rate retained up to transfer (teaching input assumption).

• Present value of the consideration entered (cash selling price for a deferred payment; amount received for an advance)

  Calculation

  Promised consideration whose payment is not aligned with the transfer (nominal amount) ; Discount rate retained (rate of a separate financing transaction between the entity and the customer at inception, in %) ; Time between payment and transfer (number of annual periods)

• Total interest over the financing period (nominal − present value)

  Calculation

  0

  Promised consideration whose payment is not aligned with the transfer (nominal amount) ; − Present value of the consideration entered (cash selling price for a deferred payment; amount received for an advance)

  Deferred payment: interest = nominal consideration − present value. Advance received: enter as promised consideration the cash selling price at transfer; the present value obtained is the amount received and the difference is the total interest expense (teaching input assumption).

• Interest expense on an advance received

  Entry

  Debit Interest expense ← Interest for the period (opening financed balance × rate retained) ; Credit Contract liability ← Interest for the period (opening financed balance × rate retained)

  To be used when the customer finances the entity through an advance: interest increases the contract liability and is presented separately from revenue (para. 65).

• Interest income on a deferred payment

  Entry

  Debit Receivable ← Interest for the period (opening financed balance × rate retained) ; Credit Interest income ← Interest for the period (opening financed balance × rate retained)

  To be used when the entity finances the customer through a deferred payment; only one of the two interest entries applies, depending on the direction of the financing retained.

IFRS 15 §53IFRS 15 §56IFRS 15 §57IFRS 15 §60IFRS 15 §61IFRS 15 §62

• Constraint on variable consideration

  JudgmentRequired

  Estimate entirely excluded from the price at this stage

  Estimate included in full: significant reversal highly improbable / Estimate partly included: only the part without risk of significant reversal / Estimate entirely excluded from the price at this stage / Not applicable: no variable consideration

  The standard sets no numerical threshold: the entity weighs the likelihood and magnitude of a reversal and the factors that increase that risk (para. 57). The amount retained is entered as variable consideration included.

• Rationale: facts relied on, analysis, alternative rejected

  TextRequired

• Significant financing component

  JudgmentRequired

  No significant financing component

  Significant component, deferred payment: the entity finances the customer (interest income) / Significant component, advance payment: the customer finances the entity (interest expense) / No significant financing component

• Rationale: facts relied on, analysis, alternative rejected

  TextRequired

• Impact by caption, derived from the entries above (the Notes line refers to the disclosures)

  TableRequired

• Paragraphs cited in this workpaper (verification status shown from the register)

  References

• The constraint is documentedPass
• The existence of a financing component is assessedPass
• The transaction price is determinedPass
• For a deferred payment, the present value agrees with the cash selling price observedNot evaluated
• The interest expense entry is balancedNot evaluated
• The interest income entry is balancedNot evaluated

Assets

0

Liabilities

0

Profit or loss

0

OCI

0

Equity

0

• Pricing terms of the contract (fixed price, discounts, rebates, bonuses, penalties, payment schedule)

  TextRequired

• Fixed consideration promised

  NumberRequired

  1,300,000

• Amounts collected on behalf of third parties (some sales taxes, for example)

  Number

• Possible outcomes of the variable consideration (one row per scenario; probabilities in percent, total 100)

  Table

  The scenarios and their probabilities are the entity's estimates based on reasonably available information (historical, current and forecast); the standard sets no probability (para. 54).

• Variable consideration included in the transaction price after the constraint

  Number

  Amount retained after assessing the constraint (para. 56 and 57): at most the estimate calculated, and only the part for which a significant reversal of cumulative revenue is highly probable not to occur. This amount results from a documented judgement of the entity.

• Fair value of the non-cash consideration promised by the customer

  Number

• Consideration payable to the customer reducing the price (part that does not pay for a distinct good or service, or exceeds its fair value)

  Number

• Promised consideration whose payment is not aligned with the transfer (nominal amount)

  Number

  1,573,000

• Discount rate retained (rate of a separate financing transaction between the entity and the customer at inception, in %)

  Number

  10 %

  The rate reflects the credit risk of the party financed and any collateral; it can be obtained by discounting the consideration to the cash selling price and is not updated afterwards (para. 64). The figure is a documented estimate of the entity, never set by the standard.

• Time between payment and transfer (number of annual periods)

  Number

  2 units

• Cash selling price observed, where available (deferred payment)

  Number

  1,300,000

• Interest for the period (opening financed balance × rate retained)

  Number

  130,000

  Share for the period of the total interest calculated below; over the whole financing period, the sum of the interest of the periods equals that total. Interest is recognised only to the extent that a contract asset, a receivable or a contract liability is recognised (para. 65).

• Evidence obtained and referenced (category, document reference)

  EvidenceRequired

IFRS 15 §46IFRS 15 §47IFRS 15 §48IFRS 15 §49

• Components examined

  ChecklistRequired

  • Contract terms and customary business practices considered
  • Amounts collected on behalf of third parties excluded
  • Fixed consideration, variable consideration or both; effects of variable consideration, financing, non-cash consideration and consideration payable to the customer
  • Assumption: contract performed as agreed, neither cancelled, renewed nor modified
  • Estimates of variable consideration excluded by the constraint left out of the price

IFRS 15 §50IFRS 15 §51IFRS 15 §53IFRS 15 §54IFRS 15IFRS 15 §56IFRS 15 §57IFRS 15IFRS 15

• Analysis of the variable consideration

  Checklist

  • Forms identified (discounts, rebates, refunds, credits, price concessions, incentives, performance bonuses, penalties, right of return, bonus contingent on an event)
  • Method retained: the one that better predicts the amount (expected value or most likely amount)
  • Method applied consistently throughout the contract, using all reasonably available information
  • Consideration the entity expects to refund: refund liability, updated at each reporting date
  • Constraint: included only if it is highly probable that no significant reversal of cumulative revenue will occur; likelihood and magnitude examined
  • Sales-based or usage-based royalty for a licence: exception dealt with in “Specific arrangements”
  • Estimated transaction price and constraint updated at each reporting date

• Estimation method retained

  ChoiceRequired

  Not applicable: no variable consideration

  Expected value / Most likely amount / Not applicable: no variable consideration

  The choice between the expected value and the most likely amount is a judgement: the entity uses the method that better predicts the amount to which it will be entitled (para. 53). The constraint (para. 56 to 58) is applied afterwards to the estimate obtained.

IFRS 15 §60IFRS 15 §61IFRS 15 §62IFRS 15 §64IFRS 15 §65

• Financing factors examined

  Checklist

  • Difference between the promised consideration and the cash selling price
  • Combined effect of the expected time between transfer and payment and prevailing market interest rates
  • Explicit or implicit financing assessed in the light of all facts; revenue at the cash selling price
  • Cases without a significant component: advance payment with transfer at the customer's discretion, variable consideration outside the parties' control, difference explained by a reason other than financing
  • Interest income or expense presented separately from revenue from contracts with customers

IFRS 15 §66IFRS 15IFRS 15IFRS 15IFRS 15 §70IFRS 15 §71IFRS 15 §72

• Points examined

  Checklist

  • Non-cash consideration at fair value; if it cannot be reasonably estimated, by reference to the stand-alone selling price of the goods or services promised
  • Change in fair value for reasons other than the form of the consideration: constraint applies
  • Goods or services contributed by the customer to facilitate performance: non-cash consideration if the entity obtains control of them
  • Consideration payable to the customer as a reduction of the price, unless it pays for a distinct good or service (excess over fair value as a reduction)
  • Reduction of revenue at the later of recognition of the related revenue and payment or promise to pay

IFRS 15 §47IFRS 15 §53IFRS 15 §61IFRS 15 §64IFRS 15 §66IFRS 15 §70

• Estimate under the expected value (sum of probability-weighted amounts)

  Calculation

  Possible outcomes of the variable consideration (one row per scenario; probabilities in percent, total 100)

• Estimate under the most likely amount (amount of the scenario with the highest probability)

  Calculation

  Possible outcomes of the variable consideration (one row per scenario; probabilities in percent, total 100)

  Both estimates are shown for comparison; only the one under the method retained (para. 53) is subject to the constraint (para. 56 to 58) before inclusion in the price.

• Transaction price (fixed + variable included + non-cash − consideration payable to the customer − amounts for third parties)

  CalculationRequired

  1,300,000

  Fixed consideration promised ; Variable consideration included in the transaction price after the constraint ; Fair value of the non-cash consideration promised by the customer ; − Consideration payable to the customer reducing the price (part that does not pay for a distinct good or service, or exceeds its fair value) ; − Amounts collected on behalf of third parties (some sales taxes, for example)

  If the price includes a significant financing component, enter the fixed consideration at the cash selling price at the date of transfer (para. 61): for a deferred payment, this is the present value calculated below; for an advance received, it is the amount received plus interest at the rate retained up to transfer (teaching input assumption).

• Present value of the consideration entered (cash selling price for a deferred payment; amount received for an advance)

  Calculation

  1,300,000

  Promised consideration whose payment is not aligned with the transfer (nominal amount) ; Discount rate retained (rate of a separate financing transaction between the entity and the customer at inception, in %) ; Time between payment and transfer (number of annual periods)

• Total interest over the financing period (nominal − present value)

  Calculation

  273,000

  Promised consideration whose payment is not aligned with the transfer (nominal amount) ; − Present value of the consideration entered (cash selling price for a deferred payment; amount received for an advance)

  Deferred payment: interest = nominal consideration − present value. Advance received: enter as promised consideration the cash selling price at transfer; the present value obtained is the amount received and the difference is the total interest expense (teaching input assumption).

• Interest expense on an advance received

  Entry

  Account	Debit	Credit
  Interest expense	130,000
  Contract liability		130,000

  To be used when the customer finances the entity through an advance: interest increases the contract liability and is presented separately from revenue (para. 65).

• Interest income on a deferred payment

  Entry

  Account	Debit	Credit
  Receivable	130,000
  Interest income		130,000

  To be used when the entity finances the customer through a deferred payment; only one of the two interest entries applies, depending on the direction of the financing retained.

IFRS 15 §53IFRS 15 §56IFRS 15 §57IFRS 15 §60IFRS 15 §61IFRS 15 §62

• Constraint on variable consideration

  JudgmentRequired

  Not applicable: no variable consideration

  Estimate included in full: significant reversal highly improbable / Estimate partly included: only the part without risk of significant reversal / Estimate entirely excluded from the price at this stage / Not applicable: no variable consideration

  The standard sets no numerical threshold: the entity weighs the likelihood and magnitude of a reversal and the factors that increase that risk (para. 57). The amount retained is entered as variable consideration included.

• Rationale: facts relied on, analysis, alternative rejected

  TextRequired

• Significant financing component

  JudgmentRequired

  Significant component, advance payment: the customer finances the entity (interest expense)

  Significant component, deferred payment: the entity finances the customer (interest income) / Significant component, advance payment: the customer finances the entity (interest expense) / No significant financing component

• Rationale: facts relied on, analysis, alternative rejected

  TextRequired

• Impact by caption, derived from the entries above (the Notes line refers to the disclosures)

  TableRequired

• Paragraphs cited in this workpaper (verification status shown from the register)

  References

• The constraint is documentedPass
• The existence of a financing component is assessedPass
• The transaction price is determinedPass
• For a deferred payment, the present value agrees with the cash selling price observedPass
• The interest expense entry is balancedPass
• The interest income entry is balancedPass

Assets

130,000

Liabilities

130,000

Profit or loss

0

OCI

0

Equity

0