majiayu000 IFRS Standards
name: ifrs-standards description: Key IFRS standards — IFRS 9, 15, 16, IAS 36, IFRS 3
When to Activate
- User asks about IFRS accounting treatment for revenue, leases, financial instruments, impairment, or business combinations
- Applying the IFRS 15 five-step revenue recognition model
- Accounting for leases under IFRS 16
- Classifying financial instruments under IFRS 9
- Performing impairment testing under IAS 36
- Purchase price allocation under IFRS 3
Core Concepts
IFRS 15 — Revenue from Contracts with Customers
IFRS 15 replaced IAS 18 and IAS 11 with a single, unified five-step model for all revenue recognition.
Five-step model:
Identify the contract — agreement creating enforceable rights/obligations; both parties approved; identifiable rights, payment terms, and commercial substance; collection is probable
Identify performance obligations (POs) — distinct goods or services promised. A good/service is distinct if the customer can benefit from it independently AND it is separately identifiable from other promises.
Determine the transaction price — amount of consideration expected. Includes:
- Fixed consideration
- Variable consideration (estimated using expected value or most likely amount; constrained to amounts where reversal is not probable)
- Significant financing component (adjust if payment terms > 12 months)
- Non-cash consideration (measured at fair value)
- Consideration payable to a customer (reduce transaction price)
Allocate the transaction price — to each PO based on relative standalone selling prices (SSP). SSP estimation methods: adjusted market assessment, expected cost plus margin, residual approach (only if SSP is highly variable)
Recognize revenue — when (or as) each PO is satisfied. Over time if: customer simultaneously receives and consumes benefits; entity creates an asset with no alternative use and has right to payment for performance to date; or entity's performance creates/enhances a customer-controlled asset. Otherwise, at a point in time.
Key judgments:
- Identifying distinct POs (especially bundled software + services)
- Estimating variable consideration and applying the constraint
- Determining SSP for items not sold standalone
- Over time vs point in time recognition
IFRS 16 — Leases
IFRS 16 eliminated the distinction between operating and finance leases for lessees. All leases (except short-term and low-value) go on balance sheet.
Lessee accounting:
At commencement:
Right-of-Use (ROU) Asset = Lease Liability
+ Lease payments made at/before commencement
+ Initial direct costs
- Lease incentives received
+ Estimated restoration costs
Lease Liability = PV of future lease payments
(discounted at rate implicit in lease, or lessee's IBR)
Subsequent measurement:
ROU Asset: depreciated over shorter of useful life and lease term (straight-line)
Lease Liability: increased by interest, reduced by payments (effective interest method)
P&L Impact:
Depreciation expense (from ROU asset) — in operating expenses
Interest expense (on lease liability) — in finance costs
Total expense is front-loaded (higher interest in early periods)
Exemptions:
- Short-term leases (term ≤ 12 months, no purchase option): expense straight-line
- Low-value assets (underlying asset value < ~$5,000 when new): expense straight-line
Lease modifications:
- Scope increase at standalone price: treat as separate lease
- Otherwise: remeasure lease liability using revised discount rate, adjust ROU asset
IFRS 9 — Financial Instruments
Classification of financial assets (based on business model + cash flow characteristics):
| Category | Business Model | SPPI Test | Measurement |
|---|---|---|---|
| Amortised cost | Hold to collect | Pass | Amortised cost |
| FVOCI | Hold to collect and sell | Pass | Fair value through OCI |
| FVTPL | Trading / other | Fail or irrevocable election | Fair value through P&L |
SPPI test (Solely Payments of Principal and Interest): Cash flows must represent only principal and interest on the outstanding amount. Instruments with leverage features, equity conversion, or non-standard interest generally fail.
Expected Credit Loss (ECL) model:
- Replaces the IAS 39 incurred loss model
- Requires forward-looking estimation of credit losses
- Three-stage model:
- Stage 1: 12-month ECL (performing assets)
- Stage 2: Lifetime ECL (significant increase in credit risk)
- Stage 3: Lifetime ECL (credit-impaired — interest on net carrying amount)
- Simplified approach for trade receivables: always recognize lifetime ECL (provision matrix)
IAS 36 — Impairment of Assets
When to test:
- Goodwill and indefinite-life intangibles: at least annually
- Other assets: when indicators of impairment exist (internal and external triggers)
Impairment test:
Carrying Amount vs Recoverable Amount
Recoverable Amount = higher of:
(a) Fair Value Less Costs of Disposal (FVLCOD)
(b) Value in Use (VIU) — PV of expected future cash flows
If Carrying Amount > Recoverable Amount → impairment loss recognized
Cash-generating units (CGUs):
- Test at CGU level when an asset does not generate independent cash flows
- Goodwill allocated to CGUs (or groups of CGUs) that benefit from the acquisition
- Impairment loss allocated: first to goodwill, then to other assets pro rata
- Goodwill impairment is never reversed; other asset impairments can be reversed
Value in Use calculation:
- Pre-tax cash flows using pre-tax discount rate (or post-tax/post-tax — must be consistent)
- Projection period: typically 5 years, then terminal value
- Growth rate for terminal value: must not exceed long-term average for the market/industry
IFRS 3 — Business Combinations
Acquisition method (mandatory):
- Identify the acquirer (who obtains control)
- Determine the acquisition date
- Recognize and measure identifiable assets, liabilities, and NCI at fair value
- Recognize and measure goodwill (or bargain purchase gain)
Goodwill calculation:
Goodwill = Consideration transferred
+ NCI (at fair value or proportionate share of net assets)
+ Fair value of previously held equity interest (step acquisition)
- Net identifiable assets at fair value (PPA)
Purchase Price Allocation (PPA) — identifiable intangibles to consider:
- Customer relationships (valued via multi-period excess earnings)
- Technology / patents (relief from royalty method)
- Trade names / brands (relief from royalty or with-and-without)
- Order backlog (excess earnings on contracted orders)
- Non-compete agreements (with-and-without method)
- Favorable contracts (differential cash flow method)
Measurement period: Up to 12 months from acquisition date to finalize PPA. Adjustments during measurement period are retrospective.
Methodology
Quick Reference by Standard
=== IFRS QUICK REFERENCE ===
Situation | Standard | Key Requirement
Revenue from product sales | IFRS 15 | 5-step model, recognize at point in time
Revenue from long-term services | IFRS 15 | Over-time recognition if criteria met
New lease signed | IFRS 16 | Recognize ROU asset and lease liability
Trade receivable collectibility | IFRS 9 | Lifetime ECL using provision matrix
Goodwill on balance sheet | IAS 36 | Annual impairment test at CGU level
Acquired a business | IFRS 3 | PPA within 12 months, goodwill on BS
Investment in associate (20-50%) | IAS 28 | Equity method
Foreign subsidiary translation | IAS 21 | Functional currency, translate at closing rate
Provisions and contingencies | IAS 37 | Recognize if probable and estimable
Employee benefits / pensions | IAS 19 | Defined benefit: actuarial valuation
Segment reporting | IFRS 8 | Operating segments per management view
Templates
IFRS Compliance Checklist
=== IFRS COMPLIANCE CHECKLIST ===
Standard | Area | Status | Notes
IFRS 15 | Revenue policy documented| [ ] |
IFRS 15 | PO identification | [ ] |
IFRS 15 | SSP determined | [ ] |
IFRS 15 | Variable consideration | [ ] |
IFRS 16 | Lease inventory complete | [ ] |
IFRS 16 | IBR determined | [ ] |
IFRS 16 | ROU assets recognized | [ ] |
IFRS 9 | Classification assessed | [ ] |
IFRS 9 | ECL provision computed | [ ] |
IAS 36 | CGU mapping done | [ ] |
IAS 36 | Annual impairment test | [ ] |
IFRS 3 | PPA completed (if M&A) | [ ] |
IFRS 3 | Goodwill allocated | [ ] |
ECL Provision Matrix Template
=== EXPECTED CREDIT LOSS — PROVISION MATRIX ===
Aging Bucket | Gross AR ($) | Historical Loss Rate | Forward-Looking Adj | ECL Rate | ECL ($)
Current (0-30d) | ____ | ___% | ___% | ___% | ____
31-60 days | ____ | ___% | ___% | ___% | ____
61-90 days | ____ | ___% | ___% | ___% | ____
91-180 days | ____ | ___% | ___% | ___% | ____
> 180 days | ____ | ___% | ___% | ___% | ____
Total | ____ | | | | ____
Quality Gate
Before finalizing IFRS-related accounting, verify:
- IFRS 15: all performance obligations are identified and distinct
- IFRS 15: SSP estimation method is documented and consistently applied
- IFRS 15: variable consideration is constrained appropriately
- IFRS 16: all leases are inventoried (including embedded leases in service contracts)
- IFRS 16: incremental borrowing rate is supportable and documented
- IFRS 16: short-term and low-value exemptions are applied consistently
- IFRS 9: financial assets are classified based on business model and SPPI test
- IFRS 9: ECL model uses forward-looking information (not just historical)
- IAS 36: CGU allocation of goodwill is documented and rational
- IAS 36: discount rate and growth rate assumptions are supportable
- IFRS 3: PPA identifies all separately recognizable intangible assets
- IFRS 3: measurement period adjustments are prospective only after 12 months
- Disclosure requirements for each standard are addressed in the notes