HKFRS 15: REVENUE FROM CONTRACTS
WITH CUSTOMERS
December 2018
1
AGENDA
1.Overview
2.A 5-step approach
3.Focus on specific topics
4.Presentation
5.Transition
2
OVERVIEW
3
WHAT ARE WE TALKING ABOUT IN PRACTICE?
More than 400 pages on HKFRS 15…
A 60-pages standard
(incl. application guidance)
170 pages of basis for
conclusions
70-pages illustrative ex.
(by theme)
4
90 pages of amendments
(standard, application
guidance, basis for
conclusions, examples)
SCOPE OF HKFRS 15
• HKFRS 15 is applicable to all contracts with customers except:
• Lease contracts within the scope of IAS 17 / HKFRS 16
• Insurance contracts within the scope of HKFRS 4
• Financial instruments and other contractual rights or obligations
within the scope of HKFRS 9, HKFRS 10, HKFRS 11, IAS 27R and IAS
28R
• Non-monetary exchanges between entities in the same line of
business to facilitate sales to customers or potential customers
• HKFRS 15 replaces IAS 11, IAS 18, IFRIC 13, IFRIC 15, IFRIC 18 and SIC
31
• Interests and dividends are now dealt within the scope of HKFRS 9 /
IAS 39
5
SCOPE OF HKFRS 15
NO
Exchange transaction?
Within HKFRS 15
YES
NO
Existence of a
contract?
<HKFRS 15.10~12>
Re-assess
continuously
<HKFRS 15.14>
YES
Outside
HKFRS 15
NO
Contract with
customer?
<HKFRS 15.6>
Qualified contract?
<HKFRS 15.9>
YES
YES
Items within other
HKFRSs?
<HKFRS 15.5>
NO
YES
Re-assess if
significant
Δ in facts &
circumstances
<HKFRS 15.13>
Exchanges of similar
items?
<HKFRS 15.5>
YES
Normal
recognition
requirements
NO
6
NO
Specific
recognition
requirements
<HKFRS 15.15
& 16>
SCOPE OF HKFRS 15
Asia
Supplier
X's Customer
USA
A
Y
Supplier
A's Customer
A's books
Upon non-monetary exchange of similar/same G/S:
Dr. Inventory oil (USA)
100
Cr. Revenue
100
Dr. Cost of sales
Cr. Inventory oil (Asia)
PL
Revenue
Cost of sales
GP
100
100
Upon delivery of oil in USA to B:
Dr. Bank
120
Cr. Revenue
120
Dr. Cost of sales
Cr. Inventory oil (USA)
GP ratio
100
100
7
X
B
No exclusion Exclusion
220
(200)
20
9%
120
(100)
20
17%
CORE PRINCIPLE: REVENUE IS RECOGNISED WHEN (OR AS) CONTROL IS TRANSFERRED
Before HKFRS 15
Construction
contracts IAS
11
Rendering of
services
IAS 18
HKFRS 15
SINGLE PRINCIPLE OF REVENUE
RECOGNITION applicable to all activities
Revenue recognition
over time
(« automatic »)
when (or as) CONTROL of the good or service
promised IS TRANSFERRED
Sales of goods
IAS 18
Revenue recognition
when major risks and
rewards are
transferred
8
Transfer of control
PROGRESSIVELY (to be
demonstrated)
Transfer of control at
A POINT IN TIME
 Revenue recognition
OVER TIME
 Revenue recognition AT
A POINT IN TIME
5 STEPS
Step 1
Step 2
Step 3
Contract(s)
Identify the contract(s) with a customer
Identify the performance obligations
(POs) in the contract
Determine the transaction price (TP)
PO 1
PO 2
TP for the contract
Step 4
Allocate the TP to the POs in the
contract
TP allocated
to PO 1
TP allocated
to PO 2
Step 5
Recognise revenue when (or as) the
entity satisfies a PO
Revenue on
PO 1
Revenue on
PO 2
9
IN A NUTSHELL…
Before HKFRS 15
HKFRS 15
• 2 standards (IAS 11 et IAS 18) and
4 interpretations (SIC 31,
IFRIC 13, IFRIC 15 et IFRIC 18)
• Standard applicable to all type of
transactions (sales of goods and
rendering of services) and to all
activities
• Accounting principles not always
consistent
• A single principle of revenue
recognition
• Some issues unresolved (use of other
accounting frameworks): nonhomogeneous practices
• All important matters are dealt with
much more clarifications + wider use
of judgment and estimates
• No convergence with US GAAP
• Convergence with US GAAP
(Topic 606)
10
PRACTICAL EXPEDIENT: APPLICATION OF HKFRS 15 TO A PORTFOLIO OF CONTRACTS
• HKFRS 15 applies to the accounting of each contract with a
customer
• As a practical expedient, an entity may apply HKFRS 15 to a
portfolio of contracts (or performance obligations), under
conditions:
• The contracts (or performance obligations) have similar
characteristics
• The entity reasonably expects that the effects on the financial
statements of applying HKFRS 15 to the portfolio would not differ
materially from applying HKFRS 15 to the individual contracts (or
performance obligations) within that portfolio
• When accounting for a portfolio, an entity shall use
estimates and assumptions that reflect the size and
composition of the portfolio
11
SCOPE OF HKFRS 15
Contracts within vs
Contracts outside
scope
● Factors to be considered:
T Exchange transaction;
T Existence of contract;
T Customer;
T Items within other HKFRSs; &
T Exchange of similar item.
12
A 5-STEP APPROACH
STEP 1
13
SCOPE OF HKFRS 15
NO
Exchange transaction?
Within HKFRS 15
YES
NO
Existence of a
contract?
<HKFRS 15.10~12>
Re-assess
continuously
<HKFRS 15.14>
YES
Outside
HKFRS 15
NO
Contract with
customer?
<HKFRS 15.6>
Qualified contract?
<HKFRS 15.9>
YES
YES
Items within other
HKFRSs?
<HKFRS 15.5>
NO
YES
Re-assess if
significant
Δ in facts &
circumstances
<HKFRS 15.13>
Exchanges of similar
items?
<HKFRS 15.5>
YES
Normal
recognition
requirements
NO
14
NO
Specific
recognition
requirements
<HKFRS 15.15
& 16>
STEP 1: IDENTIFICATION OF THE CONTRACT WITH A CUSTOMER
What is a
contract?
An agreement between 2 or more parties that creates
enforceable rights and obligations
The parties have
approved the contract
and are committed to
perform their respective
obligations
It is probable that the
entity will collect the
consideration to which it
will be entitled
(i.e. assess customer’s credit
risk)
Account for a
contract only
when 5 criteria
are met
The entity can identify
each party’s rights
regarding the goods or
services to be
transferred
The entity can identify
the payment terms for
the goods or services to
be transferred
The contract has
commercial substance
15
STEP 1: IDENTIFICATION OF THE CONTRACT WITH A CUSTOMER –
WHAT ARE THE CONSEQUENCES IF CRITERIA ARE NOT MET? (1/2)
No
Continue to assess the contract to
determine whether the criteria are
subsequently met
Does the contract meet the criteria
listed in HKFRS 15 at inception?
Yes
The contract is accounted for in accordance with
HKFRS 15 i.e. revenue may be recognised
No reassessment of those criteria unless there is
an indication of a significant change in facts and
circumstances
(e.g. a change in customer’s credit risk)
16
See next slide for the accounting
consequence in case cash is
received
STEP 1: IDENTIFICATION OF THE CONTRACT WITH A CUSTOMER – WHAT ARE
THE CONSEQUENCES IF CRITERIA ARE NOT MET? (2/2)
Did the entity received consideration from the customer (and
the criteria for identifying a contract are not met)?
No
Nothing to do
Yes
Does the entity have no remaining obligations to transfer
goods or services to the customer and all, or substantially all,
of the consideration promised by the customer has been
received by the entity and is non-refundable?
No
Yes
Yes
Has the contract been terminated and the consideration
received from the customer is non-refundable?
No
Recognise the consideration received as a liability until one of
the above events occurs or until the criteria in HKFRS 15 are
subsequently met
17
Recognise the
consideration
received as
revenue
STEP 1: IDENTIFICATION OF THE CONTRACT WITH A CUSTOMER
● Qualified contracts [general recognition model]
T Approval;
T Rights;
Qualified contracts vs
T Payment terms;
Disqualified
T Commercial substance; &
contracts
T Probable collection of $.
● Disqualified contracts [specific recognition model]
T High hurdle for revenue recognition.
18
A 5-STEP APPROACH
STEP 2
19
STEP 2: IDENTIFY THE PERFORMANCE OBLIGATIONS IN THE CONTRACT
Goods or services (G/S)
•Explicit or implicit (customer’s perspective-valid expectation)
•Activities
 Fulfilment activities
 Other activities
20
STEP 2: IDENTIFY THE PERFORMANCE OBLIGATIONS IN THE CONTRACT
Performance obligation 履約義務 (PO)
•Distinct G/S
•Series of distinct G/S
Distinct G/S?
No
Not PO
(combine until PO is identified)
Yes
Series of distinct G/S?
Yes
No
PO
(each distinct G/S is a single PO)
21
PO
(whole series is a single PO)
STEP 2: IDENTIFY THE PERFORMANCE OBLIGATIONS IN THE CONTRACT
[A] + [B] = Distinct G/S
•[A] G/S is capable of being distinct
the customer can benefit from the G/S either on its own
or together with other resources that are readily available
to the customer
•[B] Promise to transfer the G/S is distinct within the
context of the contract
the entity’s promise to transfer the G/S to the customer is
separately identifiable from other promises in the contract
22
STEP 2: IDENTIFY THE PERFORMANCE OBLIGATIONS IN THE CONTRACT
Distinct G/S
1 [Customer’s perspective]
• Benefit (stand-alone or together
with readily available resources).
No
Yes
2 [Entity’s perspective]
Absence of:
• Significant integration;
• Significant
modification/customisation; &
• Highly interdependence.
Yes
Distinct G/S
23
Not distinct
• Combine with other G/S
until a PO is identified.
STEP 2: IDENTIFY THE PERFORMANCE OBLIGATIONS IN THE CONTRACT
Distinct G/S
1 [Customer’s perspective]
• Benefit (stand-alone or together with readily
available resources:
 Stand-alone: benefit on its own
 Together with readily available resources:
G/S sold separately by the entity or others; or
Resources that the customer has already
obtained from the entity or others.
24
STEP 2: IDENTIFY THE PERFORMANCE OBLIGATIONS IN THE CONTRACT
Distinct G/S
1 [Customer’s perspective]
• Benefit (stand-alone or together with readily
available resources – failure:
 Functionality dependence;
 Monopoly;
 Not separately sold; &
 Deliver at different times.
25
STEP 2: IDENTIFY THE PERFORMANCE OBLIGATIONS IN THE CONTRACT
Distinct G/S
1 [Customer’s perspective]
• Benefit (stand-alone or together
with readily available resources).
No
Yes
2 [Entity’s perspective]
Absence of:
• Significant integration;
• Significant
modification/customisation; &
• Highly interdependence.
Yes
Distinct G/S
26
Not distinct
• Combine with other G/S
until a PO is identified.
STEP 2: IDENTIFY THE PERFORMANCE OBLIGATIONS IN THE CONTRACT
Distinct G/S
2 [Entity’s perspective]
• Significant integration;
• Significant modification
/customisation; &
• Highly interdependence.
27
STEP 2: IDENTIFY THE PERFORMANCE OBLIGATIONS IN THE CONTRACT
Distinct G/S
1 [Customer’s perspective]
• Benefit (stand-alone or together
with readily available resources).
No
Yes
2 [Entity’s perspective]
Absence of:
• Significant integration;
• Significant
modification/customisation; &
• Highly interdependence.
Yes
Distinct G/S
28
Not distinct
• Combine with other G/S
until a PO is identified.
STEP 2: IDENTIFY THE PERFORMANCE OBLIGATIONS IN THE CONTRACT
Performance obligation (PO)
•Distinct G/S
•Series of distinct G/S
Distinct G/S?
No
Not PO
(combine until PO is identified)
Yes
Series of distinct G/S?
Yes
No
PO
(each distinct G/S is a single PO)
29
PO
(whole series is a single PO)
STEP 2: IDENTIFY THE PERFORMANCE OBLIGATIONS IN THE CONTRACT
Series of distinct G/S
G/S in the series:
• are substantially the same;
• are under over time revenue model; &
• use the same method to measure the progress
PO = [distinct G/S]1 + [distinct G/S]2 + [distinct G/S]3 + …… [distinct G/S]N
30
STEP 2: IDENTIFY THE PERFORMANCE OBLIGATIONS IN THE CONTRACT
● PO:
T Distinct; but if applicable
T Series of distinct.
Benefit + Separately identifiable = Distinct
● Benefit:
T Standalone; or
Identification of POs
T Other readily available resources.
● Separately identifiable:
T Integration (significant);
T Modification or customisation (significant); or
T Interdependent or interrelated (highly) [separable risk].
Distinct + Substantially same + Over time + Same progress measure = Series of distinct
31
A 5-STEP APPROACH
STEP 3
32
STEP 3: DETERMINE THE TRANSACTION PRICE
Variable
amounts
(constraining
estimates if
need be)
Consideration
payable to the
customer
Transaction
price
Non-cash
consideration
33
Significant
financing
component
A 5-STEP APPROACH
STEP 3A – SIGNIFICANT FINANCING COMPONENT
34
STEP 3: SIGNIFICANT FINANCING COMPONENT
Does any of the followings exist?
● The customer paid for the G/S
the timing of the transfer of those G/S is at
in advance
the discretion of the customer;
● A substantial amount of the
consideration promised by the
customer is variable
the amount or timing of that consideration
varies on the basis of the occurrence or
non-occurrence of a future event that is not
substantially within the control of the
customer or the entity (e.g., if the
consideration is a sales-based royalty); or
● The difference between the
promised consideration and the
CSP of the G/S (as described in
<HKFRS 15.61>) arises for
reasons other than the provision of
finance to either the customer or
the entity
the difference is proportional to the reason
for the difference. E.g., the payment terms
might provide the entity or the customer
with protection from the other party failing
to adequately complete some or all of its
obligations under the contract.
<HKFRS 15.62>
35
YES
No
significant
financing
component
STEP 3: SIGNIFICANT FINANCING COMPONENT
Does the contract contain a significant financing component?
● Consider both the explicitly stated promise of financing & the implict promise
implied by the payment terms agreed to by the parties to the contract.
● A significant financing component exists if the timing of payments agreed to by
the parties to the contract provides the customer or the entity with a significant
benefit of financing the transfer of G/S to the customer.
● Consider all relevant facts and circumstances:
T the difference between the promised consideration & the CSP of the
promised G/S;
T the expected length of time between when the entity transfers the promised
G/S to the customer & when the customer pays for those G/S; &
T the prevailing interest rates in the relevant market.
NO
Practical expedient
● No need to adjust the
promised consideration
for the significant
financing component; &
● Disclose the fact of
using the practical
expedient <HKFRS
15.129>.
<HKFRS 15.60 & 61>
YES
Does the entity expect, at contract inception, that the period between when the
entity transfers promised G/S to a customer and when the customer pays for the
G/S will be one year or less?
[time of transfer G/S]  [time of payment] ≤ 1 year?
<HKFRS 15.63>
NO
Adjust the promised consideration for the significant financing component
<HKFRS 15.64 & 65> 36
No significant
financing component
YES
YES
Apply practical
expedient?
NO
STEP 3: SIGNIFICANT FINANCING COMPONENT
Adjust the promised consideration for the significant financing component
● Use the discount rate that would be reflected in a separate financing transaction between
the entity and its customer at contract inception which reflects:
T the credit characteristics of the party receiving financing in the contract; &
T any collateral/security provided by the customer/entity, including assets transferred in
the contract.
● After contract inception, an entity shall not update the discount rate for changes in interest
rates or other circumstances (e.g. a change in the assessment of the customer’s credit risk).
● Interest revenue or interest expense is recognised only to the extent that a contract asset
(or receivable) or a contract liability is recognised in accounting for a contract with a
customer.
● Present the effects of financing (interest revenue or interest expense) separately from
revenue from contracts with customers in the statement of comprehensive income.
<HKFRS 15.64 & 65>
Advance payments
● Interest expenses.
● Discount rate reflects the credit risk of
the entity.
Deferred payments
● Interest income.
● Discount rate reflects the credit risk of
the customer.
37
STEP 3: SIGNIFICANT FINANCING COMPONENT: TIMING DIFFERENCE BETWEEN
ENTITY’S PERFORMANCE AND CASH IN FOR A LT CONTRACT
1 down payment – full payment upon delivery
Payment is progressive over the life of the project
Structurally pre financed
10% retention on each payment
Revenue
Cash in
38
STEP 3: PRACTICALLY, HOW TO CALCULATE THE FINANCING COMPONENT FOR
A LT CONTRACT?
•
“Financing component” (i.e. interest revenue/expense) as per HKFRS 15 should
be calculated from the difference between revenue recognised and cash in from
the customer (and NOT between cash out and cash in, i.e. the net cash position
of the contract)
Revenue
Cash in
Excess cash position
Short cash position
It could be calculated as follows :
•
The (average) excess/short cash position for each period is determined and the
applicable interest rate is applied to that amount in order to determine the
financing component for that period
•
The total financing component of the contract is the sum of the component
determined for each period
39
STEP 3: SIGNIFICANT FINANCING COMPONENT
Significant finance
component (SFC)
● Deemed no SFC:
T Advance + customer's discretion on timing of transfer;
T Variable consideration + out of control on timing or
amount; or
T Non-financing reasons + reasonabless on difference
between cash price & consideration.
● Practical expedient:
T [time of transfer G/S]  [time of payment] ≤ 1 year.
● Discount rate:
T Credit risk of customer or entity if appropriate.
● Advance:
T Interest expense.
● Deferred:
T Interest income.
40
A 5-STEP APPROACH
STEP 3B – VARIABLE CONSIDERATION
41
STEP 3: VARIABLE CONSIDERATION
Does the contract explicitly
contain variable consideration?
Examples of variable
consideration:
● discounts.
● rebates.
● refunds.
● credits.
● price concessions.
● incentives.
● performance bonuses.
● penalties.
<HKFRS 15.51>
Implicit: valid expectation
Implicit: intention of the
of the customer
entity
Does the customer have a
Do other facts &
valid expectation arising
NO
NO circumstances indicate that NO N/A
from the entity’s customary
the entity’s intention, when
business practices, published
entering into the contract with
policies or specific
the customer, is to offer a
statements that the entity will
price concession to the
<HKFRS 15.52(b)>
accept an amount of
consideration that is less than
the price stated in the
contract?
<HKFRS 15.52(a)>
YES
YES
Variable consideration
42
YES
STEP 3: VARIABLE CONSIDERATION
•Estimate variable consideration
•Check if the estimated variable consideration should be
constrained
Estimated variable consideration is included in the
transaction price only to the extent that it is highly probable
that a significant reversal in the cumulative revenue
recognised will not occur when the uncertainty is
subsequently resolved
43
STEP 3: VARIABLE CONSIDERATION
Estimate the variable consideration
● Use either [expected-value] or [most-likely-value], depending on which method the
entity expects to better predict the amount of consideration to which it will be entitled.
● [Expected-value]: may be appropriate if the entity has a large number of contracts
with similar characteristics.
● [Most-likely-value]: may be if the contract has only two possible outcomes (e.g.,
either achieve a performance bonus or not).
Expected-value
 Sum of probabilityweighted amounts in a range
of possible consideration
<HKFRS 15.53(a)>
Most-likely-value
 Single most likely amount in
a range of possible
consideration amounts
<HKFRS 15.53(b)>
Estimated variable consideration
44
STEP 3: VARIABLE CONSIDERATION
Variable consideration constraint
Estimated variable consideration > Variable consideration constraint?
Variable consideration constraint:
 Estimated variable consideration is included in the transaction price only to the extent that it is highly
probable that a significant reversal in the cumulative revenue recognised will not occur when the
uncertainty is subsequently resolved.
 Consider both the likelihood & the magnitude of the revenue reversal in determining the constraint.
 Examples of factors that could increase the likelihood or magnitude of a reversal:
T the 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 of
the promised G/S.
T the uncertainty about the consideration is not expected to be resolved for a long period of time.
T the entity’s experience (or other evidence) with similar contracts is limited, or that experience (or
other evidence) has limited predictive value.
T the entity has a practice of either offering a broad range of price concessions or changing the
payment terms & conditions of similar contracts in similar circumstances.
T the contract has a large number & broad range of possible consideration amounts.
<HKFRS 15.56 & 57>
NO
YES
Estimated variable consideration
Include the estimated variable
consideration in the transaction price
General variable consideration constraint
Include the estimated variable consideration in the
transaction price at the amount of variable
consideration constraint
Re-assessment
45
STEP 3: VARIABLE CONSIDERATION
Possible
Larger
Probability
Outcome
than
(Cumulative)
($)
≥
200,000
11%
≥
180,000
41%
≥
130,000
63%
≥
110,000
80%
≥
70,000
96%
≥
0
100%
Possible
Expected
Outcome Probability
Value
($)
($)
200,000
11%
22,000
180,000
30%
54,000
130,000
22%
28,600
110,000
17%
18,700
70,000
16%
11,200
0
4%
0
100%
134,500
46
STEP 3: FREQUENCY OF ESTIMATES OF VARIABLE CONSIDERATION
At contract
inception
At the end of
each reporting
period
• First estimation of the transaction price
• Update the estimated transaction price
(including updating the assessment of
whether an estimate of variable consideration
is constrained)
• Allocate any subsequent changes in the
transaction price to the POs in the contract on
the same basis as at contract inception (see
step 4 for allocation of variable considerations
to the POs in the contract)
47
STEP 3: VARIABLE CONSIDERATION: THEN CONSIDER WHETHER THE AMOUNT
ACCOUNTED FOR SHOULD BE CONSTRAINED
Include some or all of an amount of variable consideration in the TP only to the extent
that it is highly probable that a significant reversal in the amount of cumulative revenue
recognised (for the contract) will not occur in the future
Amount of consideration highly
susceptible to factors outside the
entity’s influence?
Uncertainty about the amount of
consideration not expected to be
resolved for a long period of time?
Entity’s experience with similar types
of contracts limited
(or having limited predictive value)?
Practice of offering a broad range of
price concessions or changing the
payment terms/conditions of similar
contracts in similar circumstances?
What could be
the likelihood
and magnitude
of a revenue
reversal?
Contract with a large number and
broad range of possible consideration
amounts?
48
STEP 3: VARIABLE CONSIDERATION
Variable
consideration (VC)
● Explicit VC.
● Implicit VC:
T Valid expectation of customer; or
T Entity's intention.
● Estimation of VC:
T Expected-value method; or if appropriate
T Most-likely-value method.
● Constraint on estimation of VC
T Highly probable that no significant reversal in cumulative revenue recognised.
● Update of estimation of VC & its constraint
T At each BS date; &
T Δ recorded in transaction price.
49
A 5-STEP APPROACH
STEP 4
50
STEP 4: ALLOCATE THE TRANSACTION PRICE TO THE POs IN THE CONTRACT
Objective : reflect the amount of consideration to which the entity expects to be entitled
in exchange for goods / services
General allocation method: allocate the TP on a relative stand-alone selling price basis
Determine the “stand-alone selling price” of each performance obligation
 Existence of an “observable price*”?
Yes
No
Best indication of
the stand-alone
selling price
Stand-alone selling price
to be estimated
Several techniques possible:
• Adjusted market assessment
approach
• Expected cost plus a margin approach
…
If the selling price is
highly variable or
uncertain, the residual
approach may be used
* When the entity sells the good/service separately in similar circumstances and to similar customers
51
STEP 4: HOW TO ALLOCATE THE TRANSACTION PRICE IN PRACTICE ?
Detailed
prices for
each PO in
the contract
• Account for each PO at contractual price…
• Unless there is a clear evidence that contractual prices are
not consistent with stand alone selling prices
(Rare in practice) => Allocation of a discount guidance
Allocation of
a discount
• Proportionately to all POs in the contract (general case)
• Unless it can be demonstrated that the global discount relates
to one specific PO (or a bundle of POs)
Allocation of
variable
consideratio
n
• Allocation to the entire contract
• Unless the terms of the variable payments relate specifically
to part of the contract and the allocation of variable
consideration to that part of the contract is consistent with
stand-alone selling prices of all POs in the contract
52
STEP 4: ALLOCATE THE TP TO THE POs IN THE CONTRACT – ALLOCATION OF A
DISCOUNT
A customer receives a discount when the sum of the stand-alone selling prices (SSP)
exceeds the promised consideration in the contract
Does the entity regularly sell each distinct good/service
(or a bundle) in the contract on a stand-alone basis?
No
Yes
Does the entity also regularly sell separately a bundle (or bundles)
of some of those distinct goods/services at a discount to the SSP
of the goods/services in each bundle?
No
Yes
Is that discount substantially the same as the discount in the
contract and an analysis of those goods/services provides
observable evidence of the PO (or POs) to which the entire
discount in the contract belongs?
Yes
Allocate the discount entirely to one or more, but not all,
POs in the contract
53
No
Allocate the
discount
proportionate
ly to all POs in
the contract
STEP 4: ALLOCATE THE TP TO THE POs IN THE CONTRACT – ALLOCATION OF
VARIABLE CONSIDERATION
A variable consideration may be attributable to the entire contract
or to a specific part of it
Do the terms of the variable payment relate
specifically to part of the contract (i.e. to one or
more POs or to distinct goods/services) ?
No
Yes
Is the allocation of the variable consideration entirely to
one or more POs or to distinct goods/services consistent
with the stand-alone selling prices of all of the POs in the
contract ?
Yes
Allocate the variable consideration entirely to a
PO or a distinct good/service
54
No
Allocate the
variable
consideration
to the
entire contract
STEP 4: ALLOCATE THE TP TO THE POs IN THE CONTRACT
● Timing of SASP determination
T At contract inception (in general).
● SASP = Observable price if available.
● Estimation of SASP
T Adjusted market method
T Cost plus margin method
Relative SASP basis
T Residual method
● Threshold for all estimation methods
T Satisfy the allocation objective.
● Pre-requisites of residual method
T Existence of observable price for other POs; &
T Significant estimation uncertainties (i.e. either highly
variable historical prices or the absence of historical prices).
55
STEP 4: ALLOCATE THE TP TO THE POs IN THE CONTRACT
Allocation of
discount
● Contract-discount is allocated to all POs in the contract unless the
exception applies.
● Conditions for exception
T 3 or more POs;
T Observable prices on individual POs;
T Observable prices on a bundle of certain POs; &
T Bundle-discount ≈ contract-discount.
56
A 5-STEP APPROACH
STEP 5A – OT VS PIT
57
STEP 5: RECOGNISE REVENUE AS THE ENTITY SATISFIES A PERFORMANCE
OBLIGATION
The customer simultaneously receives and
consumes the benefits provided by the
entity’s performance as the entity performs
(HKFRS 15.35(a))
PO
satisfied
at a point
in time
No
The entity’s performance creates or
enhances an asset that the customer
controls as the asset is created or enhanced
(HKFRS 15.35(b))
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 (HKFRS 15.35(c))
58
Yes
Yes
Yes
PO
satisfied
over time
STEP 5: RECOGNISE REVENUE AS THE ENTITY SATISFIES A PERFORMANCE
OBLIGATION
Simultane
ous
• Need to substantially re-perform the work
completed to date
Alternativ
e use
• Contractual or practical restrictions
Enforcea
ble right
to
payment
s
• Throughout the contractual period
• Right to continue to complete the contract &
require payment of contractual sums
• Compensation ≥ selling price of WIP/FG (e.g.
“cost +”)
59
STEP 5: DEMONSTRATION OF TRANSFER OF CONTROL OVER TIME (1/2)
Is it clear that there is simultaneous performance by the entity
& consumption by the customer?
<HKFRS 15.35(a) & B3>
YES
NO
Would another entity need to substantially re-perform the
work completed to date?
Assumptions:
● disregard potential contractual restrictions or practical
limitations that otherwise would prevent the entity from
transferring the remaining PO to another entity; &
● presume that another entity fulfilling the remainder of the PO
would not have the benefit of any asset that is presently
controlled by the entity and that would remain controlled by the
entity if the PO were to transfer to another entity.
<HKFRS 15.35(a) & B4>
60
Over time
NO
STEP 5: DEMONSTRATION OF TRANSFER OF CONTROL OVER TIME (1/2)
Does the entity’s performance create an asset with an alternative use to
the entity?
● No alternative use if the entity is either:
T restricted contractually from readily directing the asset for another
use during the creation or enhancement of that asset; or
T limited practically from readily directing the asset in its completed
state for another use.
● The possibility of the contract with the customer being terminated is not
a relevant consideration in the assessment.
● The contractual restriction must be substantive.
● A practical limitation exists if the entity would incur significant
economic losses to direct the asset for another use.
● The assessment is made at contract inception, which is not updated after
contract inception unless the parties to the contract approve a contract
modification that substantively changes the PO.
<HKFRS 15.35(c) | 36 | B6~B8>
61
STEP 5: DEMONSTRATION OF TRANSFER OF CONTROL OVER TIME (1/2)
Does the entity have an enforceable right to payment
for performance completed to date?
● Assumption:
T The contract were to be terminated before completion for reasons other than the entity’s failure to perform as promised.
● Enforecable right:
T Consider the contractual terms & any legislation or legal precedent that could supplement or override those contractual
terms.
T Whether the entity's customary business practices of waiving a right to payment in similar contracts will render its right
to payment in the contact unenforceable is a matter of law.
T Need not be a present unconditional right to payment.
T Payment schedule might not necessarily provide evidence of the entity’s right to payment for performance completed to
date (e.g.the contract contains a right to refund for reasons other than the entity failing to perform as promised).
T A right exists, for example, if the contract (or other laws) entitles the entity to continue to transfer to the customer the
G/S promised in the contract and require the customer to pay the consideration promised in exchange for those G/S.
● Payment:
T At all times throughout the duration of the contract, compensation ≥ the selling price of the G/S transferred to date (e.g.,
recovery of the costs incurred by an entity in satisfying the PO plus a reasonable profit margin) rather than compensation for
only the entity’s potential loss of profit if the contract were to be terminated.
T Reasonable profit margin is either [1] a proportion of the expected profit margin in the contract that reasonably reflects
the extent of the entity’s performance; or [2] a reasonable return on the entity’s cost of capital for similar contracts (or the
entity’s typical operating margin for similar contracts) if the contract-specific margin is higher than the return the entity
usually generates from similar contracts.
<HKFRS 15.35(c) | 37 | B9~B13>
62
TRANSFER OF CONTROL OVER TIME: ILLUSTRATIONS
Which general nature of PO is recognized over time based on
criteria 35(a), 35(b) or 35(c)?
HKFRS 15.35(a)
HKFRS 15.35(b)
HKFRS 15.35(c)
Maintenance contracts
(day-to-day)
Major overhauls
Construction of a complex
asset
Outsourcing contracts
Building/installation of a
complex system on
customer’s land
Production of a series of
similar specific distinct items
Some real estate contracts
(when legal title passes to
customer from the
beginning)
Engineering or consulting
contracts resulting in the
issuance of a final report
63
STEP 5: RECOGNISE REVENUE AS THE ENTITY SATISFIES A PERFORMANCE
OBLIGATION
● Timing of determination
T At contract inception.
● Over time
Over time vs point in T Simultaneously performance & consumption (re-perform
time
concept);
T WIP under customer's control; or
T No alternative use asset + right to payment for
performance to date.
64
A 5-STEP APPROACH
STEP 5B – OT: MEASURE OF PROGRESS
65
STEP 5: MEASURING PROGRESS: CORE PRINCIPLES
Objective: measure the progress towards completion so as to depict
an entity’s performance in transferring control of goods/services to a customer
HKFRS 15 identifies two methods for measuring progress:
Output Method:
Direct measurement of the value of
goods/services transferred to date relative to
the remaining goods/services promised
Input Method:
Measurement based on the entity’s efforts or
inputs to satisfy a PO relative to the total
expected inputs to the satisfaction of that PO
(i.e. resources consumed, labor hours expended, etc.)
(i.e. surveys of performance completed to date, milestones
reached, etc.)
The choice of the method is not completely free and
adjustements of progress measure could be necessary
An output method does not fairly depict the
performance when the elected outputs do
not enable to evaluate some of the goods or
services whose control has been transferred
to the customer
An entity shall exclude the effects of any
inputs that do not depict the entity’s
performance (i.e. significant inefficiencies,
uninstalled materials, start-up costs, etc.)
Practical simplifications
The amount of revenue recognized can
correspond to billed amount to the customer
in certain specific circumstances
Revenue can be recognized prorata temporis
in certain circumstances
66
STEP 5: RECOGNISE REVENUE WHEN THE ENTITY SATISFIES A PERFORMANCE
OBLIGATION
Take account of all relevant indicators to assess the point in time
when transfer of control to customer takes place
Present right
to payment
for the asset
Acceptance
of the asset
by the
customer
Transfer to
customer
legal title to
the asset
Transfer of the
significant risks and
rewards of
ownership of the
asset
Transfer of
physical
possession of
the asset
67
STEP 5: MEASURING PROGRESS: CORE PRINCIPLES
OT - Progress
measurement
● Unable to reliably measure the progress
T Revenue ≤ costs if recoverable
T No revenue if not recoverable.
● Uninstalled-material excetion
T Zero-profit for the uninstalled-material portion.
● Input method
T [allocated transaction price] x ( [input to the
satisfication of PO to date] / [total input] )
T ADJ: unpriced inefficiencies or wastes
● Output method
T [allocated transaction price] x ( [value of G/S
transferred to date] / [value of all G/S] )
68
FOCUS ON SPECIFIC TOPICS
69
FOCUS ON SPECIFIC TOPICS: STEP 1
1A – COMBINATION OF CONTRACTS
70
STEP 1: COMBINATION OF CONTRACTS
Combination of two or more contracts is mandatory (accounting of a unique
contract) if…
Contracts are entered into at or near the same time
Contracts are entered into with the same customer
(or related parties of the customer)
At least one of the following criteria is met …
The contracts are
negotiated as a package
with a single
commercial objective
The amount of consideration
to be paid in one contract
depends on the price or
performance of the other
contract
71
The goods or services
promised in the
contracts (or some of
them) are a single PO
FOCUS ON SPECIFIC TOPICS: STEP 1
1B – SEPARATION OF CONTRACT
72
STEP 1: SEPARATION OF CONTRACTS
For contract which is partly within HKFRS 15 & partly outside:
Residual
73
FOCUS ON SPECIFIC TOPICS: STEP 2
2A - WARRANTIES
74
WARRANTIES
Assurance-type warranty
Warranties that provide a customer
with assurance that the related
product will function as the parties
intended because the product
complies with agreed-upon
specifications
Service-type warranty
Warranties that provide the
customer with a service in addition
to this assurance
• IAS 37 is applied:
•If the customer does not have the option to purchase
a warranty separately, and
•The warranty (or part of it) does not provide the
customer with a service in addition to the assurance
that the product complies with agreed-upon
specifications
•The warranty is accounted for as a PO (with an
allocation of a portion of the transaction price to that
PO) if:
•The customer has the option to purchase a warranty
separately (which means that the warranty is a
distinct service) or
•Additional services are provided in addition to the
assurance that the product complies with agreedupon specifications
75
WARRANTIES
Customer has the option to purchase the warranty separately
(e.g. the warranty is priced or negotiated separately)?
<HKFRS 15.B29>
YES
Distinct service
(i.e. warranty-PO)
YES
Not PO
(but apply <HKAS 37> to
account for the obligation)
NO
Is the warranty an obligation to:
(a) pay compensation, as required by laws, if the products
cause harm or damage; or
(b) indemnify the customer for liabilities & damages arising
from claims of patent, copyright, trademark or other
infringement by the entity’s products?
<HKFRS 15.B33>
NO
76
WARRANTIES
NO
Is the whole warranty an AUS-assurance-type warranty?
Factors to be considered include (but are not limited to):
● whether the warranty is required by laws;
● the length of the warranty coverage period; &
● the nature of the promised tasks (i.e. whether it is
necessary for the entity to perform the tasks to provide the
AUS-assurance).
NO
Can the entity
reasonably account
for separately the
service-type warranty
& the AUS-assurancetype warranty?
<HKFRS 15.B32>
NO
Both types of
warranties are
accounted for as a
single PO
(i.e. warranty-PO)
<HKFRS 15.B30 & B31>
YES
YES
Not PO
(but apply <HKAS 37> to account for the obligation )
AUS-assurance-type
warranty
77
Service-type
warranty is a PO
(i.e. warranty-PO)
WARRANTIES
Warranties
● Service or separately-purchased warranty  PO.
● Assurance-warranty  not PO but apply <HKAS 37>.
78
FOCUS ON SPECIFIC TOPICS: STEP 2
2B – OPTION FOR G/S
79
CUSTOMER OPTIONS FOR ADDITIONAL GOODS OR SERVICES:
Option to acquire additional G/S?
Options come in many forms e.g. sales incentives, award credits or points,
renewal options, or discounts on future G/S.
<HKFRS 15.B39>
NO
N/A
YES
Marketing offer?
● Assessment of whether it is part of an existing contract (including if it is a
promised G/S - existence of valid expectation of the customer).
YES
N/APO
Not
NO
Option to acquire additional G/S
at their stand-alone selling price ("SASP")?
<HKFRS 15.B41>
NO
Not PO
YES (i.e. not a material right - even if the option can be exercised only by
entering into a previous contract which is treated as a marketing
offer )
Does the option provide a material right to the customer?
e.g. a discount that is incremental to the range of discounts typically given for
those G/S to that class of customer in that geographical area or market.
<HKFRS 15.B40>
YES
PO
(i.e. option-PO)
80
NO
Not PO
CUSTOMER OPTIONS FOR ADDITIONAL GOODS OR SERVICES:
SASP-based transaction price allocation
● Allocate the transaction price to option-PO on a relative SASP basis in
accordance with <HKFRS 15.74>.
If the SASP for the option is not directly observable, it is estimated by
reflecting:
T the discount that the customer would obtain when exercising the option;
T any discount that the customer could receive without exercising the option;
&
T the likelihood that the option will be exercised.
SASP = f (incremental discount , likelihood of exercise)
<HKFRS 15.B40 & B42>
● Recognise revenue when the additional G/S are transferred or when the
option expires.
81
IDENTIFICATION OF A MATERIAL RIGHT PROVIDED BY AN OPTION:
ILLUSTRATION (HKFRS 15-EX.49)
• Sale of Product A for $100.
• 40% discount voucher as part of the contract for any future
purchases up to $100 in the next month.
• 10% discount is given in the next month as part of seasonal
promotion.
• 10% discount cannot be used in addition to 40% discount
voucher.
• 80% likelihood of exercise.
• Purchase of $50 (on average) of additional products by using
the voucher
• SASP = $50 * 30% * 80% = $12
82
CUSTOMER OPTIONS FOR ADDITIONAL GOODS OR SERVICES:
Options for
additional G/S
● Material rights  PO
● Estimation of SASP:
T Incremental discount; &
T Likelihood of exercise.
83
FOCUS ON SPECIFIC TOPICS: STEP 3
3A – RETURN / REFUND
84
SALE WITH A RIGHT OF RETURN / REFUND
Warranty
<HKFRS 15.B28~B33>
YES
Is it a right to return a defective product in
exchange for a functioning product?
<HKFRS 15.B27>
NO
Not a right of return
(but <HKAS 37> may
be applied for the
potential costs )
YES
Is it a right to return a product in exchange
for another of the same type, quality,
condition & price (e.g. one colour or size
for another)?
<HKFRS 15.B26>
NO
Sale with a right of return
85
SALE WITH A RIGHT OF RETURN / REFUND
Refund: return-based or non-return-based
Apply <HKFRS 15.47~72> to determine the consideration to which the entity
expects to be entitled:
[1] Estimation of variable consideration (expected-value or most-likely-value)
[2] Constraint of variable consideration
● Refund liability = Consideration received (or receivable) for which the entity
does not expect to be entitled.
● Transaction price excludes the refund liability & its subsequent changes.
● Re-measure the refund liability at each BS date with any Δ recorded in
transaction price (e.g. revenue).
<HKFRS 15.55 | B23 | B24>
86
SALE WITH A RIGHT OF RETURN / REFUND
Refund: non-return-based
Dr. Receivable/Bank
Cr. Revenue (excluding the portion to be refunded)
Cr. Refund liability
Dr. Cost of sales
Cr. Inventory
87
SALE WITH A RIGHT OF RETURN / REFUND
Refund: return-based
Specific guidance for right of return
● An entity’s promise to stand ready to accept a returned product during the
return period shall not be accounted for as a PO in addition to the obligation
to provide a refund.
● Recognise an asset for the entity's right to recover the products from
customer on settling a refund liability.
● [Right to recover] = [Carrying amount of product]
- [Expected costs to recover product]
- [Expected decrease in value of product]
● Re-measure the asset at each BS date with any Δ recorded in cost of sales.
● Present the asset separately from the refund liability.
88
SALE WITH A RIGHT OF RETURN / REFUND
Refund: return-based
Example of accounting entries:
Dr. Receivable/Bank
Cr. Revenue (excluding the portion for products expected to be returned)
Cr. Refund liability
Dr. Cost of sales
Dr. Asset for right to recover product to be returned
Cr. Inventory
<HKFRS 15.B21(c) | B22 | B25>
89
SALE WITH A RIGHT OF RETURN / REFUND
Refund
● Return a defective product in exchange for a functioning product  Warranty.
● Return a product in exchange for another of the same type, quality, condition &
price (e.g. one colour or size for another)  <HKAS 37>.
● Refund is a type of variable consideration
T Estimation & constraint requirements of variable consideration apply.
● Non-return refund
Dr. Receivable/Bank
Cr. Revenue (excluding the portion for products expected to be returned)
Cr. Refund liability.
● Return refund
Dr. Receivable/Bank
Cr. Revenue (excluding the portion for products expected to be returned)
Cr. Refund liability
Dr. Cost of sales
Dr. Asset for right to recover product to be returned
Cr. Inventory
T [Right to recover] = [Carrying amount of product]
- [Expected costs to recover product]
- [Expected decrease in value of product].
90
SALE WITH A RIGHT OF RETURN / REFUND
Refund
● Update of refund liability
T At each BS date; &
T Δ recorded in transaction price (e.g. revenue).
● Update of asset for right to recover product to be returned
T At each BS date; &
T Δ recorded in costs of sales.
91
FOCUS ON SPECIFIC TOPICS:
OTHER TOPICS
OA – COSTS OF OBTAINING A CONTRACT
92
CONTRACT COSTS: COSTS OF OBTAINING A CONTRACT
Yes
Costs whose amortisation period is one year or less?
(use of pratical expendient provided by HKFRS 15)
No
Costs explicitly chargeable to the customer?
(regardless of whether the contract is obtained)
Asset
Expense
Yes
No
No
Incremental costs (*) ?
Yes
No
Yes
Costs that the entity expects to recover?
(*) Costs that would not have been incurred if the contract had not been obtained
93
CONTRACT COSTS: COSTS OF OBTAINING A CONTRACT
Costs of
obtaining a
contract
● Conditions for recognition
T Recoverable; &
T Incremental unless explicitly chargeable.
● Option to PL for simplicity
T If the amortisation period is ≤ 1 year.
94
FOCUS ON SPECIFIC TOPICS:
OTHER TOPICS
OB – COSTS TO FULFIL A CONTRACT
95
CONTRACT COSTS: COSTS TO FULFILL A CONTRACT
1. Are costs to fulfill a contract in the scope of another standard?
Costs in the scope of
another standard?
(IAS 2, IAS 16, IAS 38, etc.) ?
No
Application of capitalization
criteria of HKFRS 15
(see next slide)
Yes
Capitalization criteria of
the given standard
fulfilled?
No
Accounting for as an
expense immediately
Yes
Accounting for as an
asset
96
CONTRACT COSTS: COSTS TO FULFILL A CONTRACT
2. What are the capitalization criteria of costs to fulfill a contract under HKFRS
15?
Costs directly related to a
No
contract or an anticipated
contract (*) ?
Yes
Costs which generate or enhance resources
of the entity that will be used in satisfying
(or continuing to satisfy) POs in the future?
No
Yes
Accounting for as an
expense
immediately
No
Costs expected to be recovered?
Yes
Accounting for as an asset
(*) For example: expected renewal of an existing contract ; specific contract not yet approved
(see « preferred bidder » status)
97
CONTRACT COSTS: COSTS TO FULFILL A CONTRACT
● Conditions for recognition
T Not within other HKFRSs;
Costs to fulfil
T Recoverable;
a contract
T Directly related to the (anticipated) contract; &
T Generate/enhance resources used to satisfy future POs.
98
PRESENTATION
99
PRESENTATION OF CONTRACT ASSETS AND LIABILITIES
Assess for impairement in accordance with HKFRS 9
Assess the relationship between the entity’s performance and the customer’s payment
Presentation of the remaining rights and performance obligations in a contract on a net basis
Contract asset
Contract liability
Entity’s right to consideration in
exchange for goods or services that
the entity has transferred to a
customer (when that right is
conditioned on something other than
the passage of time)
≠
Entity’s obligation to transfer goods or
services to a customer for which the
entity has received consideration (or
the amount is due) from the customer
Receivable
Any unconditional rights to
consideration
(i.e. only if the payment of consideration is
due because of the passage of time)
100
WHAT ARE THE PRACTICAL CONSEQUENCES FOR THE PRESENTATION OF LONG
TERM CONTRACTS IN THE B/S?
What are the practical consequences of HKFRS 15?
Assets
Liabilities
Costs incurred to obtain or fulfil
a contract
Provision for onerous contracts
Costs recognised as an asset
under IAS 2, IAS 16, IAS 38
Contract liabilities (*)
Contract assets (*)
Receivables
(*) taking into account advance payments
101
PRESENTATION OF CONTRACT ASSETS AND LIABILITIES: ILLUSTRATIONS
 On 1 January 20X9 an entity enters into a contract to transfer product to a customer on 31
March 20X9.
 In case 1 (EX. 38 CASE A – IE 198), the contract is cancellable.
 In case 2 (EX. 38 CASE B – IE 199-200), the contract is non cancellable.
 The contract requires the customer to pay consideration of 1 000 € in advance on 31
January 20X9.
 The customer pays the consideration of 1 March 20X9.
 The entity transfers the product on 31 March 20X9.
31 Mar. 20X9
1 Mar. 20X9
31 Jan. 20X9
Case 1
Case 2
Receivable
1000
Contract liability
Nothing to record
Cash
Contract liability
1000
Contract liability
Revenue
1000
1000
1000
Cash
Receivable
1000
Contract liability 1000
Revenue
102
1000
1000
1000
Recognition of a receivable
because the entity has an
unconditional right to
payment (the contract is non
cancellable)
In case 1, the entity
recognises a liability because
cash is received in advance of
performance (i.e. obligations
> rights)
PRESENTATION OF CONTRACT ASSETS AND LIABILITIES
● Receivable
Presentation
T Right to consideration is not conditional on future performance.
(contract asset | ● Contract asset
receivable |
T Receivable + $ < Revenue
contract liability) ● Contract liability
T Receivable + $ > Revenue
103
TRANSITION
104
TRANSITION REQUIREMENTS: CHOICE BETWEEN TWO METHODS
Two transition methods
(choice)
Retrospective
application with the
cumulative effect
recognised at the date
of initial application
(i.e. “modified
retrospective method)
Contracts
restated under
HKFRS 15
Contracts NOT
restated
(accounted for
along with
IAS 11/IAS 18)
Cumulative
catch-up (adj. opening RE
as of 01/01/18*)
(subject to practical
expedients)
Cumulative
catch-up (adj. opening RE
as of 01/01/17)
Full retrospective
application in
accordance with IAS 8
2017
2018
Disclosures
Contracts
under
HKFRS 15
Quantitative
information required by
IAS 8.28 as regards
adjustment of each line
of F/S affected
only for 2017
Contracts
under
HKFRS 15
Quantitative
information for 2018 as
regards changes
compared to previous
GAAPs and
explanation of the
reasons for significant
changes identified
* Possibility to restate only not completed contracts under IAS 11 / IAS 18 at first-time application
105
TRANSITION : ILLUSTRATIVE EXAMPLE
Question:
• An entity is presenting two years of comparative figures and is applying HKFRS
15 for the first time from January 1st 2018.
• Under IAS 11 and IAS 18, the entity recognises 100 of revenue for the year
2015, 2016, 2017 and 2018, that is a total of 400 of revenue for the 4 years.
• Under HKFRS 15, the entity should recognise 110 of revenue for 2015, 80 for
2016, 80 for 2017 and 130 for 2018.
Analysis of HKFRS 15 impacts on the date of initial application (2017):
Comparative periods
Current standards
2016
2017
2018
Total
Revenue
100
100
100
300
Revenue
80
80
130
290
Retained earnings (adjustment to the opening)
10
Full retrospective method
10
Comparative periods
are not restated
Modified retrospective method
Revenue
100
Retained earnings (adjustment to the opening)
106
100
130
330
-30
-30
TRANSITION REQUIREMENTS
● Full retrospective method
● Partial retrospective method
T Comparatives are not restated.
T Disclosures of changes on line-items for the current year only.
Transition
T Options:
 Not to restate completed contracts at DIA.
 To account for modifications before DIA (or beginning of
earliest) on aggregate basis.
107
Q &A
108
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