Scope of these example substantive audit procedures
These example substantive audit procedures address the accounting for revenue from contracts with customers under IFRS 15 in the financial statements.
Overview of the Standard
The core principle of the Standard is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the
entity expects to be entitled in exchange for those goods or services.
To achieve that core principle, entities should apply a five-step model to determine when to recognize revenue, and at what amount. The model specifies that revenue should be recognized when (or
as) an entity transfers control of goods or services to a customer at the amount to which the entity expects to be entitled. Depending on whether certain criteria are met, revenue is recognized:
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over time, in a manner that best reflects the entity’s performance; or
at a point in time, when control of the goods or services is transferred to the customer.
In the Table below we have documented the audit procedures performed to assess the streams of income (Fees and Commission Income) Recognised. If they meet the main considerations of the five
step model Criteria as stipulated in the standard on Amount recognised and Timing of Income recognition
1
Step
No.
1
Standard Requirement
Audit Team Assessment
Determine whether the contract is legally
enforceable and meets all of the following
criteria:
 collection of the consideration is
probable;
 rights to goods or services and payment
terms can be identified;
 it has commercial substance; and
 it is approved and the parties are
committed to their obligations.
SCB as part of its on-going business activities, provides many services to its customers. Those
obligations can be stated explicitly in the contract or implied from standard terms of Business,
publicly available information such as that available on the Group’s website or local historical
business practices.
For oral or implied contracts, consider the
relevant laws and regulations in the
jurisdiction of the contracts to assess whether
the contracts are legally enforceable.
Income can only be recognised if it is probable that the Group will collect the consideration to which
it is entitled in exchange for the services to be performed for the customer
2
Identify the performance obligations in the
contract
9
Determine whether promises to transfer a
good or service are accounted for as
performance obligations and include both
those explicitly stated in the contract, and
those that are implicit based on an entity’s
These contracts explicitly identifies each party’s rights and obligations, has commercial substance, is
agreed to by both parties and there are no credit or liquidity risk issues with the customer that would
suggest the fees were not recoverable. A contract therefore exists.
Services to be provided and payment terms must be agreed and approved by all parties to the
contract before revenue can be recognised, thus making the contract legally enforceable.
2
REMARKS
No Exception noted
Step
No.
Standard Requirement
Audit Team Assessment
established business practices or published
policies if they create a valid expectation that
the entity will transfer the good or service to
the customer.
Verify that administrative tasks that do not
transfer a good or service to the customer are
not accounted for as performance obligations
– e.g., administrative tasks to set up a
contract.
10
Determine whether promises to deliver a
series of distinct goods or services have been
combined into a single performance
obligation when the following criteria are
met:
 the goods or services are substantially the
same;
 each distinct good or service in the series
is a performance obligation satisfied over
time (see Procedure 25); and
 the same method would be used to
measure progress toward satisfaction of
each distinct good and service (see
Procedure 28).
Consider the nature of the entity’s promise to
the customer in determining whether the
goods or services are substantially the same
and the series guidance applies.
Note: To apply the series guidance it is not
necessary for goods to be delivered or
services be performed consecutively over the
contract period. There may be a gap or an
overlap in delivery or performance and that
fact would not impact the assessment of
whether the series guidance would apply.
3
REMARKS
Step
No.
11
Standard Requirement
Audit Team Assessment
Determine whether items such as discounts,
rebates, refunds, rights of return, credits, price
concessions, incentives, performance
bonuses, penalties, or similar items are treated
as variable consideration.
Determine whether promised consideration
that varies because it is contingent on the
occurrence or non-occurrence of a future
event is treated as variable consideration.
Evaluate the appropriateness of the entity’s
assessment of whether, and to what extent, it
can include an amount of variable
consideration in the transaction price at
contract inception (see Procedure 13 for
further guidance on estimating the constraint
on variable consideration).
Note: The Standard applies the mechanics of
estimating variable consideration in a variety
of scenarios, including some in which the
consideration is fixed – e.g., sales with a right
of return (see Procedure 45) and customers’
unexercised rights (breakage) (see Procedure
50).
Note: When a contract is denominated in a
foreign currency, changes in exchange rates
may affect the amount of revenue recognized
by an entity when measured in its functional
currency. However, this does not constitute
variable consideration for the purposes of
applying the Standard because the variability
relates to the form of the consideration (i.e.,
the currency) and not to other factors. Instead,
an entity applies the guidance on foreign
currency transactions and translation in order
to assess whether and, if so, how to translate
balances and transactions denominated in a
foreign currency.
4
REMARKS
Step
No.
12
Standard Requirement
Audit Team Assessment
Evaluate the entity’s estimate of variable
consideration using either of the following
amounts/methods, depending on which
amount/method the entity expects to better
predict the amount of consideration to which
it will be entitled:
Expected
value
The entity considers the sum of probability-weighted amounts for a range of
possible consideration amounts. This may be an appropriate estimate of the
amount of variable consideration if an entity has contracts with a large
number of different outcomes.
Most likely
amount
The entity considers the single most likely amount from a range of possible
consideration amounts. This may be an appropriate estimate of the amount of
variable consideration if the contract has only two (or perhaps a few)
possible outcomes.
Assess whether the method selected has been
applied consistently throughout the contract
when estimating the effect of uncertainty on
the amount of variable consideration to which
the entity will be entitled.
Note: The entity should apply the selected
method consistently for similar types of
contracts.
13
Determine whether the entity has included
some or all of the variable consideration in
the transaction price and assess whether it has
only done so to the extent that it is highly
probable that a significant reversal in the
amount of cumulative revenue will not occur
when the uncertainty associated with the
variable consideration is subsequently
resolved.
Evaluate whether the entity considered both:
the likelihood of a revenue reversal

arising from an uncertain future event;
and
5
REMARKS
Step
No.
Standard Requirement

Audit Team Assessment
the potential magnitude of the revenue
reversal when the uncertainty related to
the variable consideration has been
resolved.
Evaluate the entity’s consideration of all facts
and circumstances in making its assessment –
including the following factors, which could
increase the likelihood or magnitude of a
revenue reversal.
the amount of consideration is highly

susceptible to factors outside the entity’s
influence – e.g., volatility in a market,
the judgement or actions of third parties,
weather conditions, and a high risk of
obsolescence;
the uncertainty about the amount of

consideration is not expected to be
resolved for a long period of time;
the entity’s experience with (or other

evidence from) similar types of contracts
is limited, or has limited predictive
value;
the entity has a practice of either offering

a broad range of price concessions or
changing the payment terms and
conditions of similar contracts in similar
circumstances; and
The contract has a large number and a

broad range of possible consideration
amounts.
Determine whether the entity’s assessment
has been updated at the end of each reporting
period and considers previous experience or
results for previous or subsequent contracts of
a similar nature.
Note: An exception exists for sales- and
usage-based royalties arising from licenses of
intellectual property (see Procedure 44).
6
REMARKS
7