IFRS 15 Stand ready obligations - accounting for costs and revenue

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HVR
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Joined: 06 Dec 2021, 13:43

IFRS 15 Stand ready obligations - accounting for costs and revenue

Post by HVR »

A company offers, in addition to construction activities, maintenance contracts for buildings. In general, a maintenance contract runs for a couple of years in which the company performs inspection activities and performs regular repairs as a result of these inspections. There is no additional charge (revenue) for these repairs.
The question is how to account for these costs (and maybe revenues).

In my opinion, as the performance obligation is to keep the building in good state, revenue should be recognized over time and the cost of the repairs are expensed as incurred. What is your view on this?

In certain instances, in the last months of the maintenance contract, the customers detects all kinds of items that must be repaired before the end of the maintenance contract. This could exceed the revenue for that period (currently recognized at a straight line basis over the term of the contract). Is that correct, or should part of the fees billed in earlier periods be deferred until the last periods?

Thanks for your input on this.
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Marek Muc
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Re: IFRS 15 Stand ready obligations - accounting for costs and revenue

Post by Marek Muc »

I would do the straight-line method in this case.
https://ifrscommunity.com/knowledge-bas ... obligation
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