tfrs 15 ready for the challenges - kpmg

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Document Classification: KPMG Public

© 2018 KPMG Phoomchai Business Advisory Ltd., a Thai limited liability company and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved. Printed in Thailand.

TFRS 15Ready for the Challenges

AC Forum

KPMG in Thailand

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Comparative period

TFRS 15

New accounting standards - Timeline

TFRS 9 & 16

Y2018 Y2019 Y2020

TFRS16TFRS15

TFRS 9

TFRS 15: Revenue from Contracts with CustomersTFRS 9: Financial InstrumentsTFRS 16: Leases

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TFRS 15

Five-step Model TransitionPresentation &Disclosure

Revenue from Contracts with Customers

Preparation forYear End

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Five-step Model5-Step Model

Step 1:Identify the contract with a customer

Step 2:Identify the performance obligations in the contract

Contract(or combined contracts)

Transaction price for the contract

Step 3:Determine the transaction price

Step 4:Allocate the transaction price to the

performance obligations in the contract

Step 5:Recognize revenue when (or as)

satisfies a performance obligation

Performance Obligation

(PO) 1

Performance Obligation

(PO) 2

Transaction price

allocated to PO1

Transaction price

allocated to PO2

Recognize revenue

Recognize revenue

What’s new

Many standardsTAS 18, 11 & Others

One standard

Risk & Reward model

Control model

Limited disclosureMore detaileddisclosure

apply to all industries

Sales or services Overtime orPoint in time

Revenue recognition may be accelerated or deferred

New estimates and judgements will be required

Significant impact when sells bundling products, or when engages in major project – e.g. real estate

Five-step model

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Variable considerationVariable consideration can be

Rebates Rights of returnDiscounts Incentives

Many more…Performance

bonusesCredits Penalties

Step 3:Determine the

transaction price

Five-step model

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Variable considerationSales with a right of return

Step 3:Determine the

transaction price

Five-step model

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Example of impact on FS

Assets Liabilities

Cash xx Accounts payable (xx)

Accounts receivable xx Refund liabilities (20)

Contract assets 10 Other payables (xx)

Other current assets xx Other current liabilities (xx)

Sales with a right of return

NEW

PL

SalesSales 100Less: sales return (20)Total sales 80

CostCost of sales (50)Total cost (50)

Gross profit 30

SalesSales 100Less: sales return (20)Total sales 80

CostCost of sales (50)Less: asset 10Total cost (40)

Gross profit 40

Balance sheet

NEW

Presentation

TAS 18 TFRS 15

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Disclosure

Performance obligationsContract

balances

Disaggregation of revenue

Significant judgments

Costs to obtain or fulfil a contract

Disclose quantitative and qualitative information to enable users to understand the nature, amount, timing and uncertainty of revenue and cash flows

arising from contracts with customers

Disclosure objective

Disclosure

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Disaggregation of revenue

Geography

Market or type of

customer

Contract duration

Type of good or service

Type of contract

Sales channels

Timing of transfer of goods or services

Quantitative disclosure

Disclosure

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Example - Disaggregation of revenueDisclosure

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Example - Contract balancesGuide to annual financial statements – IFRS 15 supplement

Disclosure

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Transition options?Full retrospective

Retrospective with practical expedient

Cumulative effect

Sales schemes may change?

Tax implication?

IT system?

Implementation consideration

Transition

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Next Step & Management Support

1. Communicate new accounting policy & process to all entities

5. Business As Usual: Inform accounting department if there’re new revenue schemes or any discount/incentive provided to customers

Dec’18 Jan’19 Feb’19 Mar’19 Apr’19Nov’18

4. Prepare information to communicate to all stakeholders + Prepare MD&A for Q1’19

2. Gather data & Calculate impact adjustment for the opening balance of retained earning (1 Jan 18/19)

3. Prepare new disclosures for Q1’19 FS & consider which level of commercially sensitive information should be disclosed

TFRS 15 Accounting Policy& Summary of Impact

Adjustment entries(if any)

** Need support information from other departments **- Marketing, IT, etc…

Date of Initial Application

Q1’19 FS

New Disclosure Informationfor Q1’19 FS

** If there’s no significant change & adjustment , the facts should be disclosed **

Preparation for Year End

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TFRS 15 not yet adopted disclosureTitle of the standard

Nature of the change

Planned Application date

and effective date

The estimated impact on the FS

If that impact is not known or reasonably estimable, a

statement to that effect

Types of disclosure – FS illustrative

Preparation for Year End

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Disclosure examples (partial)Preparation for Year End

Source: Financial statement of Prudential PCL for the year ended 31 December 2017

Source: Financial statement of Kingfisher PCL for the year ended 31 January 2017Source: Financial statement of Rolls-Royce for the year ended 31 December 2017

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Source: British Airways Plc, Annual Report and Accounts Year ended 31 December 2017

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Source: Financial statement of Vodafone Group PCL for the year ended 31 March 2017 Source: Consolidated Financial statement of Nestle Group 2017

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KPMG Phoomchai Business Advisory Ltd.Empire Tower, 48th Floor1 South Sathorn RoadBangkok 10120, Thailand

Tel: +6626772000

Thank youContact us:

Supachate KunaluckkulExecutive [email protected] +66 2 677 2359

© 2018 KPMG Phoomchai Business Advisory Ltd., a Thailand limited liability company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative, a Swiss entity. All rights reserved.

The KPMG name, logo are registered trademarks or trademarks of KPMG International.

The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.

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tfrs 15 ready for the challenges - kpmg

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