Cover paper (Agenda Paper 6)

The comment period for the request for information Post-implementation Review—IFRS 15 Revenue from Contracts with Customers (RFI) ended on 27 October 2023. The IASB discussed the general feedback from respondents in its January 2024 meeting.

This paper introduced the papers for this meeting and provided a reminder of the IASB’s framework for deciding whether and when to take further action in response to specific application matters.

This paper was not discussed as it was an overview paper.

Identifying performance obligations in a contract (Agenda Paper 6A)

This paper summarised the feedback, staff analysis and staff recommendations on Question 2 of the RFI related to identifying performance obligations in a contract (including identifying performance obligations in licensing arrangements) requirements of IFRS 15.

Staff recommendation

The staff recommended that the IASB:

• take no further action on application matters raised by respondents in relation to:
  • identifying performance obligations in multi-element arrangements;
  • identifying a promise to transfer goods or services; and
  • convergence with ASC Topic 606;
• take no further action on other application matters raised by a few respondents which are summarised in Appendix A of the paper; and
• discuss later whether to add some explanations from IFRS 15:BC105 and BC116K of the basis for conclusions (BC) to IFRS 15, along with possible clarifications of the other aspects of IFRS 15;

IASB discussion

With regard to the first two staff recommendations, IASB members reiterated that entities must apply professional judgement and it is not possible to eliminate the application difficulty with respect to making significant judgments by adding additional guidance or examples in the standard. IASB members stated that the feedback does not endorse the need to have any major changes in IFRS 15.

On the third staff recommendation, a majority of IASB members stated that if any paragraphs in the BC contain principles, moving them to the main body of the standard is appropriate. However, if the paragraphs only provide explanations to principles, including them in the main body of the standard will be very disrupting and will have a negative impact on accounting policies that have already been developed by reporting entities.

Some IASB members also informed that in some jurisdictions the BC has not been endorsed by the relevant authorities. Because of this, they are supportive that some paragraphs of the BC need to be added to the main standard. One IASB member also indicated that some small entities have no resources to assess all the available material in the BC and therefore, if any principles are present in the BC, they need to be moved to the main body of the standard.

IASB decision

All IASB members voted in favour of the first two staff recommendations, i.e. to not take any further action.

On the third recommendation, 9 out of the 14 IASB members voted that the board should discuss later whether to add some explanations from IFRS 15:BC105 and BC116K to IFRS 15.

Principal versus agent considerations (Agenda Paper 6B)

This paper summarised the feedback, staff analysis and staff recommendations on Question 5 of the RFI related to principal versus agent considerations of IFRS 15.

Staff recommendation

The staff recommend that the IASB:

• take no further action on application matters in relation to:
  • the relationship between the concept of control and the indicators in IFRS 15:B37;
  • identifying a customer of a supplier that sells its goods or services through an intermediary;
  • identifying performance obligations in a multi-party arrangement;
• discuss later whether to add some explanations from IFRS 15:BC385E and BC385H along with possible clarifications of other aspects of IFRS 15; and
• classify as low priority the application matter related to assessing control over services and intangible assets and explore the matter in the next agenda consultation.

IASB discussion

IASB members reiterated that by nature the principal versus agent requirements in IFRS 15 are complicated and it is imperative to apply judgements based on the indicators mentioned in IFRS 15.

On the second staff recommendation, IASB members had the same opinion as in the previous discussion (i.e. if there are any principles mentioned in the BC, they should be moved to the main body of the standard with care to cause no disruption).

On the third staff recommendation, an IASB member informed that when IFRS 15 was developed, the IASB mainly focused on tangible goods and therefore more guidance and indicators related to the determination of control for intangible goods should to be added in IFRS 15:38.

IASB decision

All IASB members voted in favour of the first staff recommendation (i.e. to take no further action).

IASB members voted in favour to discuss the second and the third staff recommendation in a future meeting.

Licensing (Agenda Paper 6C)

This paper summarised the feedback, staff analysis and staff recommendations on Question 6 of RFI related to licensing requirements (excluding identifying performance obligations in licensing arrangements) of IFRS 15.

Staff recommendation

The staff recommended that the IASB:

• take no further action on application matters in relation to:
  • accounting for licence renewals;
  • determining the nature of a licence;
  • determining the scope of licensing guidance; and
  • accounting for sales-based or usage-based royalties; and
• take no further action on other application matters raised by a few respondents which are summarised in Appendix A of the paper.

IASB discussion

IASB members did not raise any comments on this paper.

IASB decision

All IASB members voted in favour of the staff recommendation.