International Financial Reporting Standards (IFRS)
Week 1
Lecture 1.1: GlaxoSmithKline Financial Statements
Assets (activa) | Liabilities (passiva) en Equity (eigen vermogen)
Balance sheet: Balans
Income statement: Winst & verlies rekening
Cash flow statement: Kasstroomoverzicht
Expenditure (uitgaven) can be:
Expense (kosten) income statement
Asset (uitgaven) balance sheet
- Probable future economic benefits flowing to the entity (economische voordelen)
- Its cost or value can be reliably measured (meetbaar bedrag)
Organic expenditure (kosten) Acquisition (aankopen)
Tangible Assets (MVA) Asset Asset
- rebuilding things - buying a machine
- rebuild machine
Intangible Assets (IMA) Expense Asset
- develop knowledge - buying a IMA, standing alone or
- developing a brand as part of a acquisition
Current assets: assets on the balance sheet which can either be converted to cash or used to pay current
liabilities within 12 months (liquid assets).
Non-current assets: assets of a business intended for continuing use (use full live > 12 months).
Equity changes through time as a result of the following:
Transaction with shareholders.
Gains and losses (total comprehensive income which is net income + other comprehensive income).
Lecture 1.2: Revenue Recognition at Rolls Royce
IFRS 15 vervangt IAS 11 en IAS 18. IAS 18 is vervangen, omdat het een relatief oude
standaard was en er is vandaag de dag een standaard nodig die zich meer bezighoudt
met het conceptueel framework. Het framework geeft aan dat omzet pas verantwoord
wordt, indien:
- Toekomstige economische voordelen binnenstromen in de onderneming;
- En indien deze winsten betrouwbaar kunnen worden geschat.
IFRS 15 is applicable to all sectors, but the new standard had an impact on limited
sectors, such as telecommunications and software. Mandatory since 1-1-2018.
IFRS has a great impact on contracts with multiple deliverables, variable considerations,
licensing transactions, long-term contracts, financing element in contracts, principal
versus agent.
Key objective IFRS 15: recognize revenue to depict the transfer of goods or services to customers in an amount
that reflects the consideration that the company receives, or expects to receive, in exchange for these goods or
services.
= Opbrengsten verantwoorden om de overdracht van goederen of diensten aan klanten weer te geven voor
een bedrag dat de vergoeding weerspiegelt die het bedrijf ontvangt of verwacht te ontvangen in ruil voor deze
goederen of diensten.
De nieuwe standaard is toepasbaar voor alle ondernemingen die IFRS toepassen. Voor de meeste bedrijven zal
de opbrengstverantwoording niet significant wijzigen, maar de veranderingen zullen het meest opvallen in een
aantal sectoren, zoals telecommunicatie en softwares. IFRS is vanaf 01-01-2018 verplicht gesteld.
, International Financial Reporting Standards (IFRS)
Impact van IFRS 15:
IFRS heeft de grootste impact op bedrijven met complexe contracten, zoals contracten met meerdere
verplichtingen. Voor sectoren zoals supermarkten gaat er nauwelijks impact zijn, omdat zij direct geld
ontvangen voor hun geleverde goederen.
Revenue recognition principle: recognize revenue in the accounting period when the performance obligation is
satisfied.
Five-step process for revenue recognition:
1. Identify the contract with the customers (no journal entry)
Agreement between two or more parties that creates enforceable rights or obligations
Can be written, oral or implied from customary business practice.
2. Identify the separate performance obligations in the contract
A promise to deliver a distinct product or service to a customer
Je weet wanneer het om aparte dingen gaat als je het apart zou kunnen kopen.
3. Determine the transaction price
Amount of consideration that company expects to receive from a customer
Often straightforward, but there are other contracts
Variable consideration
price dependent on future events
Volume discounts, credits, performance bonuses, royalties
companies estimate amount of revenue to recognize (inschatten)
Expected value: Probability weighted amount in a range of possible consideration
amounts. (kans)
Most likely amount: the single most likely amount in a range of possible consideration
outcomes
Time value of money
non-cash consideration
Consideration paid or payable to customers
4. Allocate the transaction price to the separate performance obligations
Indien je bijvoorbeeld twee prestatieverplichtingen hebt, bijv leveren van vliegtuigen plus het onderhoud
hierop, moet je als bedrijf bepalen wat je per product of service apart zou kunnen verdienen. Indien dit
niet direct duidelijk is, moet het bedrijf hier een zo’n goed mogelijke schatting van maken. Er zijn
verschillende manieren om dit te doen:
Adjusted market assessment approach: Evaluate the market in which it sells goods or services and
estimate the price that customers in that market are willing to pay for those goods or services. That
approach also might include referring to prices from the company’s competitors for similar goods or
services and adjusting those prices as necessary to reflect the company’s costs and margins.
Expected cost plus a margin approach: Forecast expected costs of satisfying a performance obligation
and then add an appropriate margin for that good of service.
Residual approach: If the standalone selling price of a good or service is highly variable or uncertain,
then a company may estimate the standalone selling price by reference to the total transaction price
less the sum of the observable standalone selling prices of other goods or services promised in the
contract.
5. Recognize revenue when each performance obligation is satisfied
Company satisfies its performance obligation when the customer obtains control of the good service
Change in control indicators:
Company has a right to payment for assets
Company has transferred legal title to asset.
Company has transferred physical possession of asset.
Customer has significant risks and rewards of ownership.
Customer has accepted the asset.
Company in most cases will recognize revenue at a moment in time
Recognizing revenue from a performance obligation over time
Measure progress toward completion (POC)
Most common are cost-to-cost and units-of-delivery methods.
, International Financial Reporting Standards (IFRS)
Criteria for recognize revenue over time:
The customer simultaneously receives and consumes the benefits provided by the entity’s
performance as the entity performs. (tegelijk ontvangen en verbruiken)
OR
The entity’s performance creates or enhances an asset that the customer controls as the asset is
created or enhanced. (verbetering van activa)
OR
The entity’s performance does not create an asset with an alternative use to the entity,
and the entity has an enforceable right to payment for performance completed to date. (kan niet aan
een ander verkocht worden omdat het gepersonaliseerd is).
Voorbeelduitwerking stappenproces:
Assume that Airbus (FRA) Corporation signs a contract to sell airplanes to Cathay Pacific Airlines (HKG) for €100
million.
Step 1: Identify the contract with customers.
“A contract is an agreement between two parties that creates enforceable rights or obligations. In this case,
Airbus has signed a contract to deliver airplanes to Cathay Pacific”.
Step 2: Identify the separate performance obligations in the contract.
“Airbus has only one performance obligation – to deliver airplanes to Cathay Pacific. If Airbus also agreed to
maintain the plane, a separate performance obligation is recorded for this promise”.
Step 3: Determine the transaction price.
“Transaction price is the amount of consideration that a company expects to receive from a customer in
exchange for transferring a good or service. In this case, the transaction price is straightforward – it is €100
million”.
Step 4: Allocate the transaction price to the separate performance obligations.
“In this case, Airbus has only one performance obligation – to deliver airplanes to Cathay Pacific”.
Step 5: Recognize revenue when each performance obligation is satisfied.
“Airbus recognizes revenue of €100 million for the sale of the airplanes to Cathay Pacific when it satisfies its
performance obligation – the delivery of the airplanes to Cathay Pacific”.
Na het afronden van jouw prestatieverplichtingen, verantwoord je als bedrijf zijnde dus direct de opbrengst,
ook al heeft de klant je nog niet betaald.
Voorbeelduitwerking Rolls Royce:
Rolls Royce is a UK Based aerospace and defense company. Its largest business is Civil Aerospace.
Key numbers (GBP m) 2014 2015
Revenue 13,736 13,725
Operating profit 1,390 1,499
Profit for the year 58 84
Cash flow from Oper. Act. 1,301 1,094
Total assets 22,224 22,324
Total equity 6,387 5,016
They sell you an Engine (=Original Equipment OE) and they will maintain these goods (Service agreement =
Aircraft Maintenance AM).
Als er sprake is van beide, is er sprake van twee prestatieverplichtingen, waar dus meer komt bij komt kijken
wat betreft opbrengstverantwoording.
, International Financial Reporting Standards (IFRS)
€40 million transaction price
€10 million from Contractual Aftermarket Rights
Year 0 Year 1-15 Total
Net Revenue 50 50
Cost of sales -50 -10 -60
Margin 0 -10 -10
CARs 10
Cash -10 -10
Bij het verkopen van de Engine is er dus een verlies van 10, waarvan ze verwachten dat deze wordt
terugverdiend met het maintenance gedeelte.
Journaalposten:
Year of sale:
Cash 40
Contractual Aftermarket right(CAR) 10
@ Revenues 50
Costs of goods sold 50
@ Inventories 50
Year 1-15 (cumulative):
Costs of goods sold 10
@ Amortization CAR 10
Onder de oude standaarden zouden zij dit tweezijdige contract verantwoorden als één product, onder de
nieuwe standaard, IFRS 15, wordt dit gezien als twee prestatieverplichtingen. Waarbij de verkoop van de
Engine gezien wordt als revenue at a moment in time en het maintenance gedeelte als revenu over time.
