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IFRS Talks - PwC's Global IFRS podcast
Episode 92: PwC IFRS Talks IFRS 15, over time revenue contracts
Sep 17, 2020
Katie Woods, an expert in IFRS 15 and revenue recognition, shares her insights into the complexities of accounting for over-time revenue contracts. She breaks down the three criteria that define such contracts and explains the significance of progress measurement methods. The discussion highlights the challenges of revenue recognition in construction contracts, especially with multiple performance obligations. Additionally, Woods emphasizes the critical aspects of contract modifications and the need for careful assessments of pricing and allocation to ensure accurate revenue reporting.
17:05
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Quick takeaways
- IFRS 15 establishes three key criteria for recognizing revenue over time, significantly impacting how various industries, including construction and services, account for revenue.
- The complexities surrounding contract modifications require meticulous evaluation to ensure accurate revenue recognition and prevent financial reporting errors.
Deep dives
Understanding Over Time Revenue Contracts
The discussion centers around the concept of revenue recognition for contracts that extend over time, formerly known as long-term contracts. Under IFRS 15, these contracts are evaluated based on three criteria to determine if they qualify for over time recognition. For instance, if a company is engaged in construction, the revenue can be recognized over the duration of the project as the customer simultaneously benefits from the construction progressing. This represents a shift from the previous standard, IAS 11, with IFRS 15 providing a clearer framework for various industries beyond construction, including aerospace and service-oriented sectors.
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