What Does Ifrs 15 Require to Be Disclosed for Contract Assets

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IFRS 15 is a global accounting standard that specifies the requirements for recognizing revenue from contracts with customers. The standard was developed jointly by the International Accounting Standards Board (IASB) and the Financial Accounting Standards Board (FASB) in the United States.

Under IFRS 15, companies are required to recognize revenue based on the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled. This means that companies need to disclose certain information about contract assets, which are defined asthe right to consideration in exchange for goods or services that have been transferred to a customer but where the right to consideration is not yet unconditional.

The standard sets out specific requirements for the disclosure of contract assets, which include the following:

1. Explanation of Contract Assets

Companies must provide a clear and concise explanation of how the contract asset arises, and how it is related to the sale of goods or services. This disclosure should include details of the underlying contract, and the nature of the goods or services provided.

2. Contract Asset Balances

Companies must disclose the amount of contract assets in their financial statements, as well as any changes in this balance during the reporting period. This disclosure should include details of any gains or losses that arise from changes in the value of contract assets.

3. Changes in Contract Asset Balances

Companies must provide an explanation of the reasons for any changes in contract asset balances during the reporting period. This disclosure should include details of any new contracts entered into, changes to existing contracts, or changes to the terms of contracts that have already been recognized.

4. Contract Asset Aging

Companies must provide an aging analysis of their contract assets, which shows the length of time that each asset has been outstanding. This disclosure should also include details of any provisions that have been made for uncollectible contract assets.

5. Significant Judgments and Estimates

Companies must provide an explanation of the significant judgments and estimates applied in determining the amount of contract assets recognized. This disclosure should include details of any assumptions made about the collectability of contract assets, and the timing of revenue recognition.

In summary, IFRS 15 requires companies to disclose detailed information about their contract assets, including the reasons for any changes in the balance, aging analysis, and significant judgments and estimates used in determining the amount recognized. Companies must carefully adhere to these disclosure requirements in order to provide investors and analysts with meaningful information about their financial performance and position.