IFRS 15 Applying the Distinct Criteria

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kagemoeng
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Joined: 05 Jul 2019, 10:50

IFRS 15 Applying the Distinct Criteria

Post by kagemoeng »

Hi

I am new to the forum and i have limited accounting knowledge.

I would like to know your thoughts around applying the distinct criteria of IFRS 15 to a particular contract. My question is as follows:

Vehicles are typically sold with a service contract - to replace/fix certain parts of the vehicle etc. Typically the service contract would provide the customer with say five services over a five year period i.e. one per year. Would the individual services provided be considered distinct under IFRS 15?
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Marek Muc
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Re: IFRS 15 Applying the Distinct Criteria

Post by Marek Muc »

Hi and welcome to our Forum.

Please have a look at this section:
https://ifrscommunity.com/knowledge-bas ... r-services

and let us know what your thoughts are based on the above and your specific case
kagemoeng
Posts: 3
Joined: 05 Jul 2019, 10:50

Re: IFRS 15 Applying the Distinct Criteria

Post by kagemoeng »

Hi Marek

Thank you for your reply and the reference.

I feel relatively comfortable in saying that each vehicle service is "capable of being distinct" as the customer can customer will benefit from them on their own.

I struggling to reach a conclusion based on the second criteria, i.e. are they "distinct in the context of the contract"
In particular, I am not sure if the vehicle services can be considered a bundle goods or services that represent the combined output or outputs for which the customer has contracted? Or otherwise?

I can also see how the vehicle services can be seen as a "series of distinct goods or services that are substantially the same"

Please let me know your thoughts
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Marek Muc
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Re: IFRS 15 Applying the Distinct Criteria

Post by Marek Muc »

I would say that service contract is also distinct within the context of the contract. It’s hard to imagine that a car received on day 1 is only an input to the service contract that will be received in the future :)

When you conclude that service contracts are distinct from the car, then you need to assess whether to treat them as one performance obligation or not. And then, whether this is a performance obligation satisfied over time or at a point in time. But these are next steps. My feeling is that each right to a visit in your shop is a separate performance obligation satisfied at a point in time, but you already know where to find the guidance helpful in making this assessment ;)
kagemoeng
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Joined: 05 Jul 2019, 10:50

Re: IFRS 15 Applying the Distinct Criteria

Post by kagemoeng »

Thanks Marek.
Much appreciated.
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