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Revenue Recognition 

One model. Two approaches. Five steps.

Revenue Recognition

The IASB and FASB plan to introduce a new revenue recognition model. The model features a contract-based, five-step analysis to be applied across sectors. The proposals may accelerate or defer revenue recognition for some entities and the impacts may be felt right across the business.

 

Key attributes of the revised exposure draft

 

  • Introduces a single revenue recognition model that would apply to all contracts with customers
  • Sets out two approaches to recognizing revenues:
    • over time, which is similar to current percentage of completion accounting
    • at a point in time, which is similar to current accounting for the sale of goods.

 

Five-step analysis

 

The model features a contract-based, five-step analysis of transactions to determine whether and how much revenue is recognized. The five steps are:

 

  • Identify the contract with the customer
  • Identify the separate performance obligations in the contract
  • Determine the transaction price
  • Allocate the transaction price to the separate performance obligations in the contract
  • Recognize revenue when (or as) each performance obligation is satisfied.

IFRS insights on revenue recognition

Revenue from contracts with customers New on the Horizon: Revenue from contracts with customers
This edition introduces the proposals in ED/2011/6 Revenue from contracts with customers, which was published on 14 November 2011.
Revenue from contracts with customers Revenue from contracts with customers: revised proposals (2011/35)
A high level overview of the ED on revenue from contracts with customers. We highlight the business impacts and what companies could start doing now.

Line of business insights – revenue recognition

Revenue recognition for real estate investment and development New on the Horizon: Revenue recognition for real estate investment and development
This publication focuses on the potential impact of the proposals in the revised exposure draft on revenue on many common transactions in the real estate industry, affecting both developers and investors.
Revenue recognition for telecoms New on the Horizon: Revenue recognition for telecoms
Discusses the potential impact of the revised proposals on telecoms, whether previous concerns have been addressed, highlights new issues.
Revenue recognition for building and construction New on the Horizon: Revenue recognition for building and construction
This publication looks at the potential impact of the revised proposals on entities in the building and construction sector.

Please contact your KPMG Accounting Advisory Services adviser for more information.

Dan Wilson

Dan Wilson

Partner, Audit, KPMG Canada

416-228-7160

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