In our online guide “IFRS 15 — 7 steps to prepare for January 2018” one of our suggestions is to review every deal in every contract and make it SMART. We think that whilst it’s a good idea as part of financial compliance, SMART deals are good for anyone who manages a contract with complex rebate deals, so we thought we would share it with you.
Enable Blog — IFRS 15
IFRS 15 ‘Revenue from Contracts with Customers’ comes into force on 1st January 2018.
The new financial reporting standards (IFRS 15) have a particular impact for businesses who regularly have contracts that contain “elements of variable consideration”.
IFRS 15:51 provides us with examples of “variable consideration” which include rebates, incentives, refunds, performance bonuses, credits, price concessions, penalties or other similar items – items that impact the real net-net price and ultimately profit margins. IFRS 15.51 goes on to say that “Variable consideration is also present if an entity’s right to consideration is contingent on the occurrence of a future event.” One can imagine this might stretch to something like “If you run 4 marketing events a year to promote our product, we will provide an extra discount of x%”.
Topics: IFRS 15