IFRS15 - Cloud storage

All topics related to IFRS Standards.
Post Reply
Leo
Posts: 908
Joined: 05 Apr 2020, 22:31

IFRS15 - Cloud storage

Post by Leo »

Hi,

There is a revenue stream that I'm not sure about whether it should be recognized as point in time or overtime.

Take a telecom company, for example, they provide data storage services to its clients. Clients can buy their service based on the duration of use, size, etc...

An example of what the offer could look like :

Name: Classic block storage service
Volume: 250 IOPS guaranteed
Price : 0,02€ ex VAT/month/GB

and the billing actually, is based on "pay as you go" principle at the beginning of the second month, so the company bills to clients based on their previous month's consumption. And the company books the revenue at the billing date.

Here is my analysis :

This is a revenue stream that should be recognized over time:The customer simultaneously receives and consumes the benefits provided by the entity’s performance as the entity performs)

and once, at the billing date by using the practical expedient: IFRS15, B16 :
If an entity has a right to consideration from a customer in an amount that corresponds directly with the value to the customer of the entity's performance completed to date (eg, a service contract in which an entity bills a fixed amount for each hour of service provided), IFRS15 provides a practical expedient whereby the entity may recognize revenue based on the amount it has a right to invoice.

Did you agree with my analysis?

My point is that, supposing there is one client only, and he started using this service the 15 December 2020, and our annual closing is at 31/12/2020. The revenue isn't booked in our books yet at 31/12/2020, because we only bill in January 2021 and will book the revenue in January.

What's your opinion on this please?

Thank you very much for your help.
pub_acco
Trusted Expert
Posts: 328
Joined: 19 Mar 2020, 16:40

Re: IFRS15 - Cloud storage

Post by pub_acco »

Hi, I think you should usually recognize revenue corresponding to the period from December 15 to the closing date in your example case. Para B16 doesn't mean you can delay the recognition until invoice dates, but just allows you to use invoice prices for measurements instead of following the complex steps as described in para B15.
User avatar
Marek Muc
Site Admin
Posts: 3226
Joined: 15 Oct 2018, 17:21
Contact:

Re: IFRS15 - Cloud storage

Post by Marek Muc »

I agree with pub_acco,

but aside from strict application of para B16, you probably have many customers with different billing cycles, so when looking at revenue as a whole, you should be OK with recognising revenue once invoices are issued
Leo
Posts: 908
Joined: 05 Apr 2020, 22:31

Re: IFRS15 - Cloud storage

Post by Leo »

Thank you for your answers!
User avatar
exIFRS
Trusted Expert
Posts: 234
Joined: 01 Mar 2020, 08:44
Location: London

Re: IFRS15 - Cloud storage

Post by exIFRS »

While not directly relevant to facts you set out, you might also want to look at this 2019 Agenda Decision on Cloud Software, I think it will give you some comfort that this is a simple service contract: https://cdn.ifrs.org/-/media/feature/su ... mar-19.pdf
Leo
Posts: 908
Joined: 05 Apr 2020, 22:31

Re: IFRS15 - Cloud storage

Post by Leo »

Thank you very much, it's very similar to my case I think.

I'm now quite comfortable to conclude that this is neither IFRS16 neither IAS38, but a contract service under IFRS15.

The revenue stream should be recognized over time.

Thank you, guys!

Happy new year!
Post Reply