Financial Accounting and Reporting-II: Transaction and Group Reporting Standards
The IFRS toolkit
FAR-II moves to transaction-level and group standards. IFRS 15 uses a five-step model: identify the contract, identify performance obligations, determine the transaction price, allocate it on relative standalone selling prices, and recognise revenue when control passes, either over time or at a point in time. IFRS 16 puts almost all leases on the lessee's balance sheet as a right-of-use asset and lease liability. IAS 12 covers deferred tax, IAS 21 foreign currency, IAS 23 borrowing costs, IAS 19 employee benefits. IFRS 9, IFRS 3, IFRS 10, IAS 28, IAS 33 and IAS 40 complete the syllabus.
Traps
- Variable consideration is constrained; a significant financing component is separated where the period exceeds about one year.
- Deferred tax on a revaluation is recognised in OCI, matching the gain.
- The lease liability uses the interest rate implicit in the lease, or the lessee's incremental borrowing rate when unavailable.
- Control (power, exposure to variable returns, ability to use power) makes a subsidiary; significant influence is presumed at 20% but is a matter of judgement.
- Foreign exchange differences on monetary items go to profit or loss; translation of a foreign operation goes to OCI.
Worked example
A contract price is Rs 1,000,000 for equipment plus one year of maintenance. Standalone selling prices are Rs 900,000 and Rs 300,000, totalling Rs 1,200,000. Allocation: equipment 900/1,200 x 1,000,000 = Rs 750,000 recognised on transfer of control; maintenance 300/1,200 x 1,000,000 = Rs 250,000 recognised over the service period.