Disclosure requirements concerning contracts with customers are outlined in IFRS 15.110-128 and IFRS 15.B87-B89. The IASB has emphasised that, given the extensive nature of these requirements and their irrelevance for certain entities, they shouldn’t be seen as a checklist. Instead, they should be approached with the disclosure objective and materiality in mind (IFRS 15.110-112, BC331).
These requirements can be categorised into several key areas:
- Contracts with customers (IFRS 15.113).
- Disaggregation of revenue (IFRS 15.114-115).
- Contract balances (IFRS 15.116-118).
- Performance obligations (IFRS 15.119-122).
- Significant judgements made (IFRS 15.123-126).
- Contract costs recognised as assets (IFRS 15.127-128).
- Practical expedients (IFRS 15.129).
Contracts with customers
IFRS 15 mandates that revenue and impairment losses stemming from contracts with customers should be disclosed separately from those not arising from such contracts. For instance, explanatory notes prepared by entities with notable leasing revenue should differentiate revenue recognised under IFRS 16 from that recognised under IFRS 15.
Disaggregation of revenue
Paragraph IFRS 15.114 mandates the disclosure of disaggregated revenue from contracts with customers, supplemented by guidance in IFRS 15.B87-B89. Notably, there isn’t a fixed list of revenue categories. Instead, entities should reflect how revenue is presented in other external sources, such as investor presentations, as well as internal financial reports. IFRS 15.B87 further suggests that certain entities might require multiple categories to achieve the disclosure objective. An example of this can be found in Example 41 accompanying IFRS 15.
Additionally, IAS 34 mandates the disaggregation of revenue in interim financial reports, making it the sole IFRS 15 disclosure requirement relevant to interim financial statements.
Contract balances
The requirements in IFRS 15.116-118 aim to facilitate the understanding of the relationship between the recognised revenue in a given period and the variations in contract balances (IFRS 15.BC341).
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Performance obligations
Paragraphs IFRS 15.119-122 deal with disclosures related to performance obligations. These specify that entities must explain how they usually satisfy their performance obligations and detail payment terms, warranties, or refund liabilities. Entities are also instructed to disclose the ‘backlog’, or the transaction price allocated to remaining performance obligations. See also Examples 42 and 43 accompanying IFRS 15.
Significant judgements made
The requirements in IFRS 15.123-126 highlight the need for disclosing judgements made during the application of IFRS 15. Even though IAS 1 already mandates the disclosure of judgements, the IASB introduced specific requirements for revenue, attributing this to the significant weight users of financial statements place on revenue (IFRS 15.BC355).
More about IFRS 15
See other pages relating to IFRS 15:
Identifying a Contract
Performance Obligations and Timing of Revenue Recognition
Contract Modifications
Transaction Price
Principal vs Agent, or Reporting Revenue Gross vs Net
Revenue from Licensing of Intellectual Property
Revenue from Customers’ Unexercised Rights (Breakage)
Customer Loyalty Programmes and Other Options for Additional Goods or Services
Warranties
Contract Assets and Contract Liabilities
Contract Costs
Disclosure