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Start with IFRS 15

Revenue from Contracts · 8 questions

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Under IFRS 9, the ECL model is forward-looking — you provision from Day 1, not only when there is evidence of default.

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Under IFRS 9, the ECL model is forward-looking — provision from Day 1, not only on evidence of default.

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◆ IFRS 15 Advanced

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IFRS 15

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IFRS 16

78%

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IAS 36

64%

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IAS 12

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IFRS 15

When a customer pays upfront for a 3-year SaaS contract, how is it treated?

IAS 36✓ CONQUERED

An impairment loss should be reversed for goodwill when…

IFRS 16

The lease liability is initially measured at…

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Mr. Ledger AI

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IFRS · IAS · ISA specialist

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Welcome! I'm your FinMentra AI tutor. Ask me anything about IFRS, IAS, ISA, Costing or Financial Management.

I'll cite the exact paragraph references so you can verify everything. 📖

Explain IFRS 15 in 1 minute

IFRS 15 — The 5-Step Revenue Model

Para 9, 22, 31, 47, 73, 105
Step 1: Identify the contract with a customer
Step 2: Identify performance obligations
Step 3: Determine the transaction price
Step 4: Allocate price to obligations
Step 5: Recognise revenue when each obligation is satisfied

Key test: Revenue = when CONTROL transfers, not when cash is received or invoice issued.

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Mei T.

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IFRS 15

How do you handle contract modifications mid-period? Our client added new services to an existing SaaS deal.

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IAS 36

Best way to test goodwill impairment for a small CGU with limited market data?

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Account

IFRS 15

Revenue from Contracts

›

Core Principle

Recognise revenue to depict transfer of goods/services at the amount expected to be received.

5-Step Model

1. Identify contract → 2. Identify POs → 3. Determine price → 4. Allocate → 5. Recognise.

Dr Receivable / CashX

Cr RevenueX

⚠️ EXAM TRAP

Recognising on invoice rather than transfer of control.

IFRS 16

Leases

›

Core Principle

Lessees recognise ROU asset + lease liability for almost all leases at PV of payments.

Dr ROU AssetX

Cr Lease LiabilityX

⚠️ EXAM TRAP

Continuing operating-lease treatment for lessees after 2019.

IFRS 9

Financial Instruments

›

Core Principle

Classify at amortised cost, FVOCI or FVPL. ECL model: Stage 1 = 12m, Stage 2 = Lifetime (SICR), Stage 3 = Lifetime credit-impaired.

Dr Credit Loss ExpenseECL

Cr Loss AllowanceECL

⚠️ EXAM TRAP

IFRS 9 is forward-looking — ECL from day 1, not on evidence of default.

IAS 16

Property, Plant & Equipment

›

Core Principle

Recognise at cost; subsequently cost or revaluation model (policy choice per class). Depreciate over useful life.

Dr PPE (Cost)X

Cr Cash / PayablesX

⚠️ EXAM TRAP

Revaluation gains go to OCI, not P&L. Training costs are never capitalised.

IAS 36

Impairment of Assets

›

Core Principle

Recoverable amount = higher of FVLCD and VIU. Impair when CA > RA. Goodwill tested annually.

Dr Impairment Loss (P&L)X

Cr Acc. Impairment / AssetX

⚠️ EXAM TRAP

Goodwill impairment is NEVER reversed under IFRS.

IAS 37

Provisions & Contingencies

›

Core Principle

Provision when: (1) present obligation from past event, (2) probable outflow, (3) reliable estimate.

Dr Expense (P&L)X

Cr ProvisionX

⚠️ EXAM TRAP

Cannot provision for future operating losses — no present obligation.

Journal Entry Builder

Statement of Financial Position

IAS 1

Non-Current Assets

Property, Plant & Equipment

Intangible Assets

Right-of-Use Assets (IFRS 16)

Total Non-Current Assets—

Current Assets

Inventories (IAS 2)

Trade Receivables

Cash & Equivalents

Total Current Assets—

TOTAL ASSETS—

Equity

Share Capital

Retained Earnings

Total Shareholders' Equity—

Non-Current Liabilities

Long-term Borrowings

Lease Liabilities NC (IFRS 16)

Total NC Liabilities—

Current Liabilities

Trade Payables

Total Current Liabilities—

Total Liabilities—

TOTAL EQUITY & LIABILITIES—

Recent Activity

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IFRS 18 webinar

12 Apr 2026

2.0h

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ICAEW IAS 36 course

3 Apr 2026

4.5h

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Big-4 IFRS update

28 Mar 2026

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IFRS Disclosures

0 done

Complete set of financial statements (5 components + notes)

IAS 1.10

Going concern assessment disclosure

IAS 1.25

Disaggregation of revenue

IFRS 15.114

ROU asset class disclosure & lease maturity

IFRS 16.47

Goodwill / intangibles by CGU + key assumptions

IAS 36.134

Risk exposures from financial instruments

IFRS 7.31

Components of tax expense

IAS 12.79

Reconciliation of effective tax rate

IAS 12.81

Description of provisions & expected timing

IAS 37.85

NEW STANDARDJan 2025

IFRS 18 — Presentation & Disclosure

Replaces IAS 1. Introduces categorised income statement: operating, investing, financing sections.

AMENDMENTAug 2023

IAS 21 — Lack of Exchangeability

Guidance on when a currency is not exchangeable and how to estimate the spot rate.

EXPOSURE DRAFTSep 2024

IFRS for SMEs — Third Edition

Aligns SME standard with full IFRS updates including IFRS 15 & 9.

AMENDMENTMay 2024

IFRS 9 & IFRS 7 — Power Purchase Agreements

Targeted amendments for renewable energy contract accounting.

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IFRS 15

Contract modification adding distinct goods at SSP → treated as a separate new contract.

IAS 36

Recoverable amount = higher of FVLCD and Value in Use.

📝 My Notes

Saved Notes

IFRS 15 Key PointsToday

5-step model: contract → POs → price → allocate → recognise...

IAS 36 Impairment ChecklistYesterday

Annual test for goodwill. RA = max(FVLCD, VIU). Never reverse goodwill...

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🧮 Enter your own numbers — results update instantly. All inputs are editable.

💰 WACC — Weighted Average Cost of Capital

WACC = Ke × E/(D+E) + Kd × (1−t) × D/(D+E)

Ke — Cost of Equity (%)

Kd — Cost of Debt (%)

Tax Rate (%)

Equity (E)

Debt (D)

WACC =9.60%

📈 CAPM — Cost of Equity

Ke = Rf + β × (Rm − Rf)

Rf — Risk-free Rate (%)

β — Beta

Rm — Market Return (%)

Ke =11.40%

🌱 Gordon Growth Model — Share Valuation

P₀ = D₁ / (Ke − g)

D₁ — Next Dividend

Ke — Cost of Equity (%)

g — Growth Rate (%)

P₀ =$31.25

📊 Key Financial Ratios — Live Calculator

Revenue

Cost of Sales

Current Assets

Inventories

Current Liabilities

EBIT

Capital Employed

PAT

Shares (millions)

Pref Dividends

📦 NRV — Net Realisable Value (IAS 2)

NRV = Selling Price − Costs to Complete − Selling Costs

Estimated Selling Price

Costs to Complete

Selling Costs

NRV =400

📋 IFRS 16 — Lease Amortisation Table

Lease Liability = PV of lease payments at IBR (or implicit rate)

Annual Payment

IBR / Rate (%)

Term (years)

Initial Lease Liability =2,723

Year	Opening	Interest	Payment	Closing

Journal entry each year: Dr Lease Liability (principal) · Dr Interest Expense · Cr Cash

🏦 IFRS 9 — Expected Credit Loss Calculator

ECL = PD × LGD × EAD

PD — Probability of Default (%)

Stage 1: 12-month PD · Stage 2/3: Lifetime PD

LGD — Loss Given Default (%)

Typically 40-65% for unsecured receivables

EAD — Exposure at Default

Outstanding balance at default

ECL Provision =3,000

🏗️ IAS 16 — Depreciation Calculator

Straight-line: Dep = (Cost − Residual) / Useful Life

Cost of Asset

Residual Value

Useful Life (years)

Year Number (for NBV)

Annual Dep =4,500

NBV (Yr 3) =36,500

IFRS 16 vs IAS 17

Exam Key

OLD — IAS 17

❌ Operating lease off-BS
❌ Only finance leases on SFP
❌ Straight-line expense

NEW — IFRS 16

✅ All leases on SFP
✅ ROU asset + liability
✅ Interest + depreciation

IAS 37 vs IAS 10

Common Confusion

IAS 37 PROVISIONS

Past event creates present obligation. Probable outflow. Reliable estimate. → RECOGNISE liability.

IAS 10 EVENTS

Adjusting: conditions existed at year-end. Non-adjusting: arose after. → Adjust vs disclose.

IFRS 9 ECL Stages

IFRS 9

Stage	Trigger	ECL	Interest
1	No SICR	12-month	Gross
2	SICR	Lifetime	Gross
3	Impaired	Lifetime	Net

Marginal vs Absorption

Costing

MARGINAL

Fixed costs = period costs. Inventory excludes fixed. Contribution-based. No inventory effect.

ABSORPTION

Fixed costs in product cost. Inventory includes fixed. Profit higher when inventory rises. Required by IAS 2.

⚠️ The most commonly missed exam points. Master these to gain easy marks.

IFRS 15 — Revenue

❌ Revenue recognised when invoice is issued.
✅ Recognised when CONTROL transfers to customer.

❌ Upfront payment = immediate revenue.
✅ Creates a contract LIABILITY (Para 106).

IAS 36 — Impairment

❌ Goodwill impairment can be reversed.
✅ NEVER reversed under IFRS (IAS 36.124).

❌ Recoverable amount = fair value.
✅ RA = HIGHER of FVLCD and VIU.

IFRS 16 — Leases

❌ Operating leases still off-balance-sheet after 2019.
✅ IFRS 16 puts ALL lessee leases on SFP.

IAS 37 — Provisions

❌ Can provision for future operating losses.
✅ No present obligation → cannot recognise.

IAS 16 — PPE

❌ Staff training costs are capitalised with a new asset.
✅ Training costs are ALWAYS expensed immediately.

2025

IFRS 18 — Presentation & Disclosure

Replaces IAS 1. Categorised P&L: operating / investing / financing. Effective 2027.

2021

IFRS 17 — Insurance Contracts

Replaced IFRS 4. GMM, PAA and VFA measurement models. Effective 2023.

2016

IFRS 16 — Leases

Replaced IAS 17. Effective 2019. Added ~$3 trillion to global balance sheets.

2014

IFRS 15 — Revenue from Contracts

Replaced IAS 18 & IAS 11. Universal 5-step model. Effective 2018.

2014

IFRS 9 — Financial Instruments

Replaced IAS 39. Forward-looking ECL model. Effective 2018.

2005 & earlier

IAS Foundation Standards

IAS 1, 2, 7, 8, 10, 12, 16, 19, 36, 37, 38, 40 — the core accounting rulebook.

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Scenario 1 of 5

IFRS 15

Client: TechSoft Ltd, a SaaS company.

TechSoft signs a 3-year contract for $360,000 paid upfront on 1 Jan. The contract includes software access ($240,000) and annual support ($120,000). The software is delivered on day 1. How should TechSoft recognise revenue?

Audit Working Paper

ISA 315

Client: Meridian Retail PLC | Year end: 31 Dec 2025 | Prepared by: Senior Auditor

Area: Revenue Recognition (IFRS 15)

Risk: Management override — cut-off manipulation

Assertion: Completeness, Accuracy, Cut-off

Procedures performed:

□ Agreed sample of revenue entries to invoices

□ Tested cut-off — 5 days either side of year-end

□ Confirmed contract terms for 3 large customers

□ Reviewed contract modifications for revenue impact

Findings

⚠ EXCEPTION NOTED

Invoice #4471 dated 2 Jan 2026 relates to goods dispatched 29 Dec 2025. Revenue of $84,000 should be recognised in 2025.

✓ SATISFACTORY

Cut-off procedures confirm no material misstatement in remaining sample of 42 items.

Audit Conclusion

⚖️ Professional ethics cases based on IESBA Code of Ethics and real exam scenarios.

Case 1 — Independence

Threat

Your audit firm has been asked to also prepare the financial statements for Nexus Corp, whose audit you lead. The fee would be significant.

What type of threat arises?

Case 2 — Confidentiality

Dilemma

During an audit you discover strong evidence that your client has been evading tax. The client refuses to disclose this. What should you do?

Essential Finance Formulas

=NPV(rate,cashflows)

Net Present Value — excludes Year 0 outflow

=IRR(values)

Internal Rate of Return

=PV(rate,nper,pmt)

Present Value — use for lease liability calculation

=XLOOKUP(lookup,range,return)

Modern replacement for VLOOKUP

=SUMIF(range,criteria,sum_range)

Conditional sum — useful for trial balance analysis

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Division by zero. Use =IFERROR(A1/B1,"—") to handle.

#N/A

Lookup value not found. Check exact/approximate match in VLOOKUP.

IFRS 16 — Lease Amortisation

Worked

Facts: 3-year lease, annual payment $10,000 payable at year-end, IBR = 5%.
Step 1 — Calculate PV: PV = 10,000/1.05 + 10,000/1.05² + 10,000/1.05³ = $27,232

Year	Opening	Int 5%	Payment	Closing
1	27,232	1,362	(10,000)	18,594
2	18,594	930	(10,000)	9,524
3	9,524	476	(10,000)	0

IAS 16 — Straight-Line Depreciation

Worked

Facts: PPE cost $50,000, residual value $5,000, useful life 10 years.

Depreciation = (Cost − Residual) / Useful Life
= ($50,000 − $5,000) / 10 = $4,500/year

Journal Entry (each year):
Dr Depreciation Expense $4,500
Cr Accumulated Depreciation $4,500

NBV after Year 3: $50,000 − (3 × $4,500) = $36,500

IFRS 9 — ECL Calculation

Worked

Facts: Trade receivable $100,000, Stage 1 (12-month). PD = 3%, LGD = 45%.

ECL = PD × LGD × EAD
= 3% × 45% × $100,000 = $1,350

Journal Entry:
Dr Credit Loss Expense $1,350
Cr Loss Allowance $1,350

If SICR occurs → move to Stage 2 → use Lifetime ECL instead of 12-month.