IFRS for SMEs / Third edition changes / Section 23 in the third edition: the five-step revenue model
Section 23 in the third edition: the five-step revenue model
Section 23 is rewritten on the model in IFRS 15, simplified for small companies. Revenue is recognised when, or as, the entity satisfies each promise to a customer.
What changes
- Section 23 Five steps: identify the contract, identify the performance obligations, determine the transaction price, allocate it to the obligations, and recognise revenue as each is satisfied.
- 23.82 Disaggregate revenue into categories that show how economic factors affect it.
- 23.83 Disclose contract balances: receivables, contract assets and contract liabilities.
What to prepare
- Identify contracts that bundle goods and services, such as a sale with installation or a maintenance period.
- Identify deposits received before work starts: these are contract liabilities.
- Decide how revenue will be disaggregated, for example by service line or by customer type.
How Sight handles it
On the third edition, the revenue policy switches to the five-step wording and the revenue note disaggregates revenue by account.
Section 23: Revenue from Contracts with Customers: the section in full.
Other third-edition changes
- Section 2 in the third edition: concepts and pervasive principles
- Section 3 in the third edition: material accounting policy information
- Section 4 in the third edition: disaggregating line items
- Section 6 in the third edition: dividends declared after year end
- Section 7 in the third edition: financing liabilities and supplier finance
- Section 8 in the third edition: material policies and judgements
- Section 11 in the third edition: one section for financial instruments, ageing and maturity
- Section 12 in the third edition: the new fair value section
- Section 19 in the third edition: business combinations
- Section 29 in the third edition: uncertain tax treatments
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