IFRS 15 Point in Time/Over Time between Subsidiaries

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nelsonhong
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Joined: 07 Jan 2021, 15:38

IFRS 15 Point in Time/Over Time between Subsidiaries

Post by nelsonhong »

Hi all, the scenario is as below.

- Company A and Company B are subsidiaries of the same parent company.
- Company A signs a sales contract to perform accounting service of 2 years for a client; however, Company A does not perform the accounting service itself, it subcontracts the accounting service to its related company, Company B.

In the above case, I assume that Company A is to recognize the revenue from the actual client "point in time" as it does not continuously provide and perform the service to the client (the obligation to perform the accounting service goes to Company B). And for Company B, I assume the revenue subcontracted from Company A is to be recognized "over-time", as it is the actual party that provides the accounting services.

If my assumptions above is correct, what about the consolidation adjustments in the parent's level? Since the intercom-cost in Company A is to be recognized point in time to match the revenue, while the intercom-revenue in Company B is being amortized over 24 months, how will the elimination entry be like? Should the difference between the elimination of intercom-revenue and intercom-cost goes to contract assets?

Thanks.
nelsonhong
Posts: 4
Joined: 07 Jan 2021, 15:38

Re: IFRS 15 Point in Time/Over Time between Subsidiaries

Post by nelsonhong »

Company A is agent.
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Marek Muc
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Re: IFRS 15 Point in Time/Over Time between Subsidiaries

Post by Marek Muc »

OK so A recognises net revenue only at a point time amounting to the expected margin to be earned

there won't be any contract asset at group level, A won't show any expenses, just the margin, you will probably need to recognise some consolidation adjustments to match the desired revenue recognition at group level, but it's just a matter of writing everything down and looking what needs to be adjusted - you can do it here and we will see how it goes
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