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IASB publishes clarifications to IFRS 15

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Apr 12, 2016

On April 12, 2016, the International Accounting Standards Board (IASB) published final clarifications to IFRS 15 'Revenue from Contracts with Customers'. The amendments are effective for annual reporting periods beginning on or after January 1, 2018 (same effective date as IFRS 15 itself). Earlier application is permitted.


On May 28, 2014, the IASB issued IFRS 15 Revenue from Contracts with Customers. After issuing the new revenue standard, which is sub­stan­tially the same as the FASB's ASU 2014-09, the IASB and the FASB formed the joint Revenue Tran­si­tion Resource Group (TRG) to support the im­ple­men­ta­tion of the new standard. The sub­stan­tial majority of the issues discussed by the TRG were resolved without the need for stan­dard-set­ting activity. However, five topics (iden­ti­fy­ing per­for­mance oblig­a­tions, principal versus agent con­sid­er­a­tions, licensing, col­lec­tabil­ity, and measuring non-cash con­sid­er­a­tion) were iden­ti­fied as requiring con­sid­er­a­tion by the Boards. In addition, some stake­hold­ers asked for practical ex­pe­di­ents. After con­sid­er­ing the five topics and possible practical ex­pe­di­ents, the IASB proposed in July 2015 targeted amend­ments in three areas of IFRS 15 as well as some tran­si­tion relief. The proposals in the exposure draft have now been finalized.


The amend­ments in Clar­i­fi­ca­tions to IFRS 15 address three of the five topics iden­ti­fied (iden­ti­fy­ing per­for­mance oblig­a­tions, principal versus agent con­sid­er­a­tions, and licensing) and provide some tran­si­tion relief for modified contracts and completed contracts. The IASB concluded that it was not necessary to amend IFRS 15 with respect to col­lec­tabil­ity or measuring non-cash con­sid­er­a­tion. In all its decisions, the IASB con­sid­ered the need to balance helping entities with im­ple­ment­ing IFRS 15 and not dis­rupt­ing the im­ple­men­ta­tion process.

Iden­ti­fy­ing per­for­mance oblig­a­tions. IFRS 15 requires an entity to identify per­for­mance oblig­a­tions on the basis of distinct promised goods or services. To clarify the concept of 'distinct', the IASB has added the clar­i­fi­ca­tion that the objective of the as­sess­ment of a promise to transfer goods or services to a customer is to determine whether the nature of the promise, within the context of the contract, is to transfer each of those goods or services in­di­vid­u­ally or, instead, to transfer a combined item or items to which the promised goods or services are inputs.

Principal versus agent con­sid­er­a­tions. When another party is involved in providing goods or services to a customer, IFRS 15 requires an entity to determine whether it is the principal in the trans­ac­tion or the agent on the basis of whether it controls the goods or services before they are trans­ferred to the customer. To clarify how to assess control, the IASB has amended and extended the ap­pli­ca­tion guidance on this issue, and es­pe­cially stresses:

  • that an entity de­ter­mines whether it is a principal or an agent for each specified good or service promised to the customer and could be a principal for some specified goods or services and an agent for others;
  • that the in­di­ca­tors provided for assessing control are not a con­clu­sive list; and
  • that the in­di­ca­tors provided may be more or less relevant to the as­sess­ment of control depending on the nature of the specified good or service and the terms and con­di­tions of the contract so that different in­di­ca­tors may provide more con­vinc­ing evidence in some contracts than others.

Licensing. When an entity grants a license to a customer that is distinct from other promised goods or services, the entity has to determine whether the license is trans­ferred at a point in time or over time on the basis of whether the contract requires the entity to undertake ac­tiv­i­ties that sig­nif­i­cantly affect the in­tel­lec­tual property to which the customer has rights. To clarify when an entity's ac­tiv­i­ties sig­nif­i­cantly affect the in­tel­lec­tual property, the IASB has amended the ap­pli­ca­tion guidance and stresses that the ac­tiv­i­ties sig­nif­i­cantly affect the in­tel­lec­tual property if:

  • the ac­tiv­i­ties are expected to sig­nif­i­cantly change the form or the func­tion­al­ity of the in­tel­lec­tual property; or
  • the ability of the customer to obtain benefit from the in­tel­lec­tual property is sub­stan­tially derived from, or dependent upon, those ac­tiv­i­ties.

Ad­di­tion­ally, the IASB has extended the ap­pli­ca­tion guidance with respect to the ap­pli­ca­tion of the royalties con­straint.

Tran­si­tion relief. The IASB has provided two ad­di­tional practical ex­pe­di­ents (both optional):

  • An entity need not restate contracts that are completed contracts at the beginning of the earliest period presented (for entities that using the full ret­ro­spec­tive method only)
  • For contracts that were modified before the beginning of the earliest period presented, an entity need not ret­ro­spec­tively restate the contract for those contract mod­i­fi­ca­tions but shall instead reflect the aggregate effect of all of the mod­i­fi­ca­tions that occur before the beginning of the earliest period presented (also for entities recognizing the cu­mu­la­tive effect of initially applying the standard at the date of initial ap­pli­ca­tion). 

Interaction with the FASB

The FASB has adopted a more piecemeal approach to amending its revenue standard and has decided to publish more extensive amend­ments. Final amend­ments to the ap­pli­ca­tion guidance on principal versus agent con­sid­er­a­tions were published in March 2016, amend­ments on iden­ti­fy­ing per­for­mance oblig­a­tions and licensing are expected soon, and amend­ments on other narrow scope amend­ments and practical ex­pe­di­ents on tran­si­tion are expected slightly after that.

Also, while the IASB has announced that it will no longer attend TRG meetings as it is of the view that stake­hold­ers need to know that they can continue their im­ple­men­ta­tion process with the con­fi­dence that IFRS 15 will not be subject to further changes, the FASB declared in February that it will continue to address im­ple­men­ta­tion issues and has scheduled three TRG meetings for 2016.

Additional information

To learn more about the amendments and potential impacts, look out for an upcoming publication as part of our Clearly IFRS series and register for our webcast that will be available for viewing June 14, 2016.

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