Read the following publications to further understand how the sector-specific arrangements are affected, … The presentation of fulfillment costs related to S&H is not addressed in ASC 606. Nov 06, 2018 at 05:39 PM, Clear and easy to understand. Background. IFRS 15 includes specific requirements related to “customer options for additional goods or services” and requires a distinction to be made as to whether this option confers a “material right”. Entities would likely recognize revenue in full when control of the goods passed to the customer. The reasons for the IASB’s IFRS 15 does not include the same specific guidance; however, IFRS reporters should consider the application of materiality concepts when identifying performance obligations. shipping and handling activities that occur after the customer has obtained control of a good as an activity to fulfill the promise to transfer the good rather than as an additional promised service. Midlothian, Virginia 23114, PH + 1 (804) 897-0608 Shipping and handling activities When shipping and handling is performed after control of the good is transferred to the customer, the Cr. However, if control passes to the customer after shipment (i.e. Inventory $103 In particular, IFRS 15 includes new guidance on accounting for repurchase agreements, including scenarios when those goods will or may be repurchased as part of another asset and when goods that … evaluates the impact of IFRS 15. Nov 12, 2018 at 06:15 PM. The relevant guidance is in ASC 605-45-45-20. 151 Le Gordon Drive, Suite 101 This issue was brought to attention of the Transition Resource Group (TRG) who discussed the matter and, ultimately, advised for clarifying guidance to be issued. The answer is simple – free shipping! What exactly are “repurchase agreements” and what is their impact on accounting for revenue under IFRS 15? Keep up-to-date on the latest insights and updates from the GAAP Dynamics team on all things accounting and auditing. Of course, I'm sure some companies argue that S&H is immaterial, but that is a judgment call (and one you have to take up with your auditors). It is unclear whether the different decisions will lead to divergence because it appears that the boards may need further information to … Although we are CPAs and have made every effort to ensure the factual accuracy of the post as of the date it was published, we are not responsible for your ultimate compliance with accounting or auditing standards and you agree not to hold us responsible for such. Thank you - however for where the goods were sold FOB what is the treatment under IFRS 15 ? Entities must make an accounting policy election to treat shipping and handling activities as either a fulfillment cost or as a separate promised service (i.e. If your business is not a freight or shipping business (which I suspect it isn't) then what you are really talking about is shipping and handling costs. In this revised scenario, shipping and handling activities would constitute a fulfillment activity, rather than a separate performance obligation. Outside a lack of technology, part of the challenge is also interpreting the rules. 928 0 obj <>/Filter/FlateDecode/ID[<703E919981036549A52F172B6624A364><52207691B48FE947A59CB207D83E71B3>]/Index[902 41]/Info 901 0 R/Length 115/Prev 272792/Root 903 0 R/Size 943/Type/XRef/W[1 2 1]>>stream IFRS 15 has been endorsed by the EU. IFRS IN PRACTICE 2017 – IFRS 15 REVENUE FROM CONTRACTS WITH CUSTOMERS 5 1. 41 . Outside a lack of technology, part of the challenge is also interpreting the rules. Hope this helps! See Example 8 accompanying IFRS 15. h�bbd``b`� ���A��%bI�X@�oWD���s2���r� f ��$����.�x�g@B�*�S ��R$�> -}&FfQ�,#����-_ e-c Methodology In line with this aim, publicly available financial reports of the leading multinational shipping It is not required to be made at an entity level. IFRS 15 Revenue from Contracts with Customers – impact of adoption . IFRS 15 states also that it is possible to recognise revenue on a straight-line basis if the entity’s efforts or inputs are spread evenly throughout the performance period. The toll refiner will typically make an economic return by charging a unit cost but it will also usually retain any metal recoveries above a contractual threshold and may also retain certain by-products for no consideration. Follow-up question: What if control of the promised goods transfers to the customer after the shipping and handling activities are performed? For all other entites the effective date for interim periods is the fiscal years beginning after Dec. 15, 2019. State boards of accountancy have final authority on the acceptance of individual courses for CPE credit. Comparing the New Revenue Recognition Standards: IFRS 15 and ASC 606 (August 30, 2016) As originally issued, IFRS 15 and ASC 606 were very similar with very little difference between the two standards. Follow-up question: What about under IFRS? Therefore passing it all along to the customer, where does this fall under GAAP? Agenda Paper 7C: Licensing—feedback on ED and redeliberations The IASB confirmed its previous decisions to clarify the application guidance in IFRS 15 relating to the following licensing issues, as proposed in the ED: a. Jun 27, 2018 at 11:50 PM. This is the price (excluding shipping and handling fees) a seller has provided at which the same item, or one that is nearly identical to it, is being offered for sale or has been offered for sale in the recent past. Mar 22, 2020 at 07:09 AM, Mike, For example, is "drop ship" from 3rd party suppliers/vendors equally determinable of control transfer? I love Amazon Prime, especially around the holidays. In our experience, most entities would chose the later as it is business as usual. IFRS 15 is the New Revenue standard issued by IASB to replace the IAS 18 and IAS 11. The transition date for the new revenue recognition standards (ASC 606 and IFRS 15 Revenue from Contracts with Customers) is quickly approaching for private companies!Although it's … ii. IFRS guidance does not allow an entity to make a policy election to account for shipping and handling activities that occur after the customer has obtained control of a good as an activity to fulfill the promise to transfer the good rather than as an additional promised service. Components of a Contract (IFRS-15/ASC (606-10-25-2) b) … This would be the case under both U.S. GAAP … Do shipping terms (FOB shipping point vs destination) principally determine the timing of control transfer or other/additional factors must also be considered, shipping terms notwithstanding? Shipping and handling activities would always be considered a fulfillment activity. (IFRS 15 & ASC 606: 606-10-25-1 THROUGH 25-13) a) A contract is an agreement between 2 parties that creates enforceable rights and obligations. Help me clarify, we are a distributor, when the material arrives the warehouse, we add 3% to the value of what we received, calling it a shipping and handling fee, we then tell the sales person their new price to the customer is over and above this shipping and handling fee. Shipping and handling … Scribd es el sitio social de lectura y editoriales más grande del mundo. To summarize, if the customer takes control of the goods BEFORE shipment (e.g. Allowed tags:
Add a new comment: This blog shares our insights and conversations about accounting, auditing, and training matters. In other words, do you value shipping and handling services provided by sellers or resellers of goods? What are fulfillment costs? Only when the customer takes control of the goods before they are shipped, would S&H be a separate performance obligations. The transaction price is allocated to the various performance obligations and revenue is recognized for each performance obligation, either over time or at a point in time based on the rules within ASC 606. This would be the case under both U.S. GAAP (ASC 606) and IFRS (IFRS 15). %%EOF ... read more. Companies using IFRS must implement IFRS 15 Revenue from Contracts with Customers for reporting periods beginning on or after 1 January 2018. This paper accompanies the following IASB agenda papers: (a) Agenda paper 7A Implications of amending IFRS 15 before the mandatory effective date. The reasons for the IASB’s decisions are explained in paragraphs BC7- Hope it helps! This is an inportant point that is a key part of this overall question. FOB Destination)). Regardless this would not be proper for GAAP purposes (although perhaps you are only doing this for cost accounting purposes, which I'll readily admit was my worst subject at UF and I've avoided it like the plague after passing the CPA exam). One follow up question I was hoping you could clarify. Jun 27, 2018 at 10:46 PM. ASU 2016-10 was issued in April 2016 and amended ASC 606 for shipping and handling activities as follows: If the customer takes control of the good before shipment: If the customer takes control of the goods after shipment: Assuming control of the goods passes to the customer prior to delivery, most entities would probably choose the election to account for shipping and activities as fulfillment costs, as this is their existing accounting and, quite frankly, it is easier than having to implement new systems, processes, and internal controls.  | Tags: Accounting. 942 0 obj <>stream Repurchase Agreements. However, costs incurred related to shipping and handling do not meet the definition of an asset nor are they eligible for capitalization. Thanks for your question, Anne. However, four ASUs later, the standards are moving further apart. In the situation where the customer obtains control of the goods before shipping, the shipping and handling … Under IFRS 15, the accounting treatment is the same if both books are delivered at the same time. Using your example, let's say your company purchased inventory for $100. IFRS 15 provides the 5 step framework on how and when to recognize the sale. The IASB decided to make some, but not identical, changes to its new revenue standard, IFRS 15, Revenue from Contracts with Customers. 0 reviewed and modified in shipping com panies for implementing IFRS 15. The converged standard IFRS 15 Revenue from Contracts with Customers was issued on 28 May 2014 and must be applied in an entity's first annual IFRS financial statements … An entity is required to identify performance obligations on … However, as your business grows and evolves – whether by developing new products and services, embedding technological innovations or buying new businesses – you may be facing challenges in applying IFRS 15 to new facts and circumstances. IFRS 15 will change the way many retailers and wholesalers account for their contracts. It should not be applied by analogy to other type of activities such as custodial or storage services, which may be considered separate performance obligations in accordance with ASC 606-10-25-17 or immaterial in the context of the contract in accordance with ASC 606-10-25-16A. To identify performance obligations in a contract, ... IFRS. They argued that providing entities with an accounting policy choice would create an exception to the new revenue recognition model, which could reduce comparability between entities. The IASB decided to not make a similar amendment to IFRS 15. The IASB recognizes that this may lead to differences between IFRS and U.S. GAAP but believes that IFRS 15, as written, is sufficient. In addition to the differences noted above, the FASB has provided an exception for accounting for shipping and handling activities and is … It is imperative that entities take … Under IFRS 15, If so, the shipping and handling … ??? IFRS in Practice 20202021 IFRS 15 Revenue from Contracts with Customers 5 In step 3 a vendor determines the transaction price of each contract identified for accounting purposes in step 1, and then in step 4 allocates that transaction price to each of the performance obligations identified in step 2. In summary, if a promised good or service is “distinct,” it represents a separate performance obligation. Oct 01, 2020 at 02:46 PM, If a company charges its customers for shipping/handling and an elects to treat the shipping and handling costs as a fulfillment cost, where is the expense classified on the income statement? That aside, the GAAP treatment of S&H shouldn't matter and depends on when the customer takes control of the goods. ... read more, Views on how restrictions on financial instruments impact the determination of fair value are evolving, potentially changing current practice for investment companies under ASC 946. This is just one in a series of blog posts on the new revenue standard that we have summarized here, along with other resources to help you with implementation. IFRS 15 requires an entity to assess the goods or services promised in a contract to ... of a contract, and an accounting policy election relating to shipping and handling activities that the IASB is not proposing to address. IFRS 15 The IASB has proposed amendments to IFRS 15 in some of the areas discussed by the TRG. However, the SEC noted that for significant S&H costs classified outside cost of sales, registrants should consider whether they should disclose the amount of costs and the line item on the income statement that includes them. those steps are … It is hosted by GAAP Dynamics. the piece allocated to S&H) is only recognized once you've fulfilled your obligation to ship the goods. Clarifications to IFRS 15 Revenue from Contracts with Customers is issued by the International Accounting Standards Board® (the Board). Diversity in practice 2017 – IFRS 15 is the treatment under IFRS 15:. 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