PRFS 15:

REVENUE FROM
C O N T RA C T S W I T H
CUSTOMER
E FFECTI VI TY DATE
JANUARY 1, 2018
 C ORE OF PFRS 1 5
To recognize revenue in the accounting
period when the performance obligation
is satisfied
 F I V E - S T E P S F RA M E W O R K

IDENTIFY THE
IDENTIFY THE
SEPARATE DETERMINE THE
CONTRACT WITH
PERFORMANCE TRANSACTION PRICE
CUSTOMER
OBLIGATION

ALLOCATE THE RECOGNIZE REVENUE

TRANSACTION PRICE WHEN OR AS EACH
TO THE IDENTIFIED PERFORMANCE
PERFORMANCE OBLIGATIONS IS
OBLIGATIONS SATISFIED
 F I V E - S T E P S F RA M E W O R K

IDENTIFY THE
IDENTIFY THE
SEPARATE DETERMINE THE
CONTRACT WITH
PERFORMANCE TRANSACTION PRICE
CUSTOMER
OBLIGATION

ALLOCATE THE RECOGNIZE REVENUE

TRANSACTION PRICE WHEN OR AS EACH
TO THE IDENTIFIED PERFORMANCE
PERFORMANCE OBLIGATIONS IS
OBLIGATIONS SATISFIED
 S t ep 1: I dentify t h e
Contract
A contract with customer is accounted for only when all of the
following criteria are met.
1. T h e c o n t r a c t i n g p a r t i e s h a v e a p p r o v e d t h e c o n t r a c t a n d a r e
committed to perform their respective obligations:
2. T h e e n t i t y c a n i d e n t i f y e a c h p a r t y ’s r i g h t s a n d o b l i g a t i o n s
regarding goods and services to be rendered.
3. T h e e n t i t y c a n i d e n t i f y t h e p a y m e n t t e r m s
4. T h e c o n t r a c t h a s c o m m e r c i a l s u b s t a n c e
5. T h e c o n s i d e r a t i o n i n t h e c o n t r a c t i s p r o b a b l e c o l l e c t i o n .
• Performance of ei ther • If an entity performs
party wi ll give ri se to a be fore the customer pays
contract asset or li abil ity con si d eration of before
• If a customer pays, or an pa yment i s due, the
enti ty has a right to an en ti ty shall recogni ze
amount of consi derati on con tract asset, excluding
before the entity transfers any a mount presented
a good or servi ce to the as r ec eivable
customer, the entity shal l • En ti ty may use
recogni ze contract l iabil ity al te rn ati ve descripti ons
Illustrative Problem 1
On January 1, 2020, Gerwin Company (seller) entered into a
contract of sale with Hannah Bonita (buyer). The contract is
structured such that Gerwin must deliver the goods on March
30, 2020 and Hannah Bonita must pay 200,000 on April 31,
An entity recognizes revenue to depict the
2020. The cost of the goods transferred is 80,000. transfer
of promised goods or services to customers in an
amount that reflects the consideration to which the
entity expects to be entitled in exchange
Required: Provide the necessary journal entries on:for those
goods and services.
a.January 1, 2030
b.March 30, 2030
c.April 31, 2030
Illustrative Problem 2
On January 1, 2030, Gerwin Company entered into a
contract of sale with Hannah Bonita. The contract is structured
such that Gerwin Company must deliver the goods on April 31,
2030 and Hannah bonita must pay 200,000 on March 30, 2030.
An entity recognizes revenue to depict
The cost of the goods transferred is 80,000. the transfer
of promised goods or services to customers in an
amount that reflects the consideration to which the
entity expects to be entitled in exchange
Required: Provide the necessary journal entries on:for those
goods and services.
a.January 1, 2030
b.March 30, 2030
c.April 31, 2030
 contract asset is the entity’s right to
consideration in exchange for goods
or services transferred to a customer
while receivable is the entity's right to
consideration that is unconditional.
Illustrative Problem 3
On January 21, 2025 Department of accountancy entered
into contract with JPIA for the sale of two mirrorless camera for
100,000 each. The contract requires one camera to be
delivered on February 14, 2025 and states that the payment
for the delivery of the first camera is conditional on the
An entity recognizes revenue to depict the transfer
delivery of the second camera. The second camera
of promised goods or services to customers in an is delivered
on July 31, 2025
amount and the the
that reflects payment of the to
consideration two cameras
which the was
entity
received expects to be
on September entitled in exchange for those
8, 2025.
goods and services.

Required: Provide necessary journal entries on:

1.January 1, 2025
2.February 14, 2025
3.July 31, 2025
 S t ep 2: I dentify t h e
Sep a r a te Performa n c e
Obligations
Performance obligation is a promise in a contract
to provide a product or service to a customer.
Distinct – a good or service that is promised to
customer is distinct if both of the following criteria
are met:
1. the customer can benefit from the good or
service
2. separately identifiable from the other
promises in the contract
Illustrative Problem 4
Mona computers manufactures and
sellsAncomputers that
entity recognizes include
revenue a the
to depict warranty
transfer to
of promised goods or services to customers in an
make good on any defect in its computers
amount that reflects the consideration to which the
for 150 days.
entity expects to be In
entitled addition,
in exchange
goods and services.
for it
thosesells
separately an extended warranty, which
provides protection from defects for three
years beyond the 150 days. How many
 St ep 3 : Determine t h e
Tr a nsa ction Pri c e
Transaction price – the amount of consideration
an entity expects to be entitled to in exchange for
transferring promised goods and services to a
customer.
1. Variable consideration
2. Existence of a significant financing
component
3. Noncash consideration
4. Consideration payable to customer
Illustrative Problem 5
Mona enters into a contract with Snowy to install a
music system together with its software. On January
21, 2025, Snowy pays Mona an upfront fixed fee of
P50,000 for six months of featured access. Snowy
An entity recognizes revenue to depict the transfer
also will pay Mona
of promised a or
goods bonus of to
services 30,000 if Snowy
customers in an can
amount that reflects the consideration to which the
use the music system anytime without experiencing
entity expects to be entitled in exchange for those
technical difficultygoods
duringandthe 6-month period. Mona
services.
estimates a 70% chance that it will achieve the
usage target and receive the P30,000 bonus.
How much is the expected value of the contract price at
inception?
Illustrative Problem 6
On September 1, 2025, Fyang Company sold
goods to Jas Company in exchange for a 4-year,
non-interest bearing note with a face amount of
P500,000. The goods have a cost on Fyang’s
An entity recognizes revenue to depict the transfer book
of P200,000. Imputed
of promised goods orrate of 10%
services to customers in an
amount that reflects the consideration to which the
Required:
entity expects to be entitled in exchange for those
goods and services.
How much is the transaction price and gross profit
if the cash selling price of the goods is P300,000?
How much is the transaction price and gross profit
if the cash selling price is not available?
 CONSIDERATION PAYABLE TO A
CUSTOMER

Payment of distinct goods or services from customer

shall be accounted for in the same way that it
accounts for other purchases from suppliers, unless,
the consideration payable to customer is higher
than the fair value of goods or services, or the fair
value cannot be reasonably estimated.
Illustrative Problem 7
Imagine TechCorp sells computers to a large
customer, Alpha Inc., for P100,000. At the same
time, Alpha Inc. provides advertising services to
TechCorp worth P15,000. TechCorp agrees to pay
An entity recognizes revenue to depict the transfer
P20,000 for these
of promised advertising
goods or servicesservices.
to customers in an
amount that reflects the consideration to which the
Required:
entity expects to be entitled in exchange for those
How much revenue goodsshould
and services.
TechCorp record for the
merchandise sold to Alpha Inc?
How much revenue should TechCorp record for the
merchandise sold if the fair value of the advertising
services cannot be reasonably estimated?
Step 4: Allocate transaction
price to the separate
performance obligation
- Does not apply to contracts with single
performance obligation
- Allocation basis – relative fair value or stand alone
selling price of each performance obligation
- If the stand alone selling price is not directly
observable, an entity shall estimate the stand
alone selling price
Illustrative Problem 12
JarFyang is a manufacturer of automated whiteboard used in the
conduct of CPA Review. JarFyang has the following arrangement with
Jarlette CPA Review Center:
a.Jarlette purchases the automated whiteboard from JarFyang at a
price of P1,522,500 and prefer JarFyang to do the installation and
Training
An and JarFyang
entity agreed revenue
recognizes on such arrangements
to depict the transfer
of promised
b.The price goods or
of the installation services
service to customers
is estimated to haveina fair
an value
amount that reflects the consideration to which the
of P435,000
entity expects to be entitled in exchange for those
c.The fair value of the training sessions is estimated to at P217,500
goods and services.
d.Jarlette is obligated to pay JarFyang the P1,522,500 contract price
upon the delivery and installation of the automated whiteboard
e.Jarlette delivers the automated whiteboard on September 1, 2028
and completes the installation on November 1, 2028. Training related
to the automated whiteboard starts after the installation and lasts
for 5 months. The automated whiteboard has a useful life of 15
THANK
YOU