IFRS15 Significant Finance component and IA37 Provisions

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tnsabela
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Joined: 02 Jun 2020, 23:05

IFRS15 Significant Finance component and IA37 Provisions

Post by tnsabela »

Hi All, please assist with this query. Company X entered into a 10 year contract with a client and received a 20% prepayment. Two years later, Company X negotiated a further prepayment from its client however agreed that it would deliver additional goods in lieu of the interest that would have been earned by the client in the second prepayment. These goods would be delivered at the end of the contract. My question is whether the second prepayment is a significant financing component? According to IFRS15 the goods to be delivered are meet the definition of a contract liability and if so must they be discounted? If to be discounted must the unwinding be recorded under Revenue or finance costs?
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Marek Muc
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Re: IFRS15 Significant Finance component and IA37 Provisions

Post by Marek Muc »

Payment received 10 years in advance surely looks like financing component :)

You can read more in our knowledge base:

https://ifrscommunity.com/knowledge-bas ... -component

Received cash is recognised as contract liability and then intetest is accrued through finance costs over time. When performance obligation is satisfied, the whole amount is recognised as revenue
tnsabela
Posts: 4
Joined: 02 Jun 2020, 23:05

Re: IFRS15 Significant Finance component and IA37 Provisions

Post by tnsabela »

Thanks for the reply.
Irfan Mustafa
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Joined: 05 May 2020, 18:51

Re: IFRS15 Significant Finance component and IA37 Provisions

Post by Irfan Mustafa »

In my opinion, financing component should not be recorded for the second prepayment because this treatment would negate para 61 of IFRS 15.
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Marek Muc
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Location: Warsaw, Poland

Re: IFRS15 Significant Finance component and IA37 Provisions

Post by Marek Muc »

how?
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