(a) Criteria for a Contract with a Customer to Fall Within the Scope of IFRS 15

IFRS 15 – Revenue from Contracts with Customers outlines the requirements for recognizing, measuring, and disclosing revenue. To fall within the scope of IFRS 15, the following criteria must be met:

1. Identification of the Contract:
   • A contract exists when there is an agreement between parties creating enforceable rights and obligations.
   • Contracts can be written, oral, or implied.
2. Identification of Performance Obligations:
   • The contract must specify the goods or services to be provided.
   • These performance obligations can be explicit, implicit, or arise from customary business practices.
3. Determination of Transaction Price:
   • The transaction price is the amount of consideration a company expects to receive in exchange for goods or services.
   • The price must be fixed or determinable.
4. Allocation of Transaction Price:
   • For contracts with multiple performance obligations, the transaction price must be allocated to each obligation based on its relative standalone selling price.
5. Measurement of Revenue:
   • Revenue is recognized when performance obligations are satisfied, either over time or at a point in time.
   • The revenue amount is the consideration the entity expects to be entitled to for providing the goods or services.
6. Disclosures:
   • Companies must disclose information about the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers.
7. Approval of the Contract:
   • All parties must approve the contract for it to be valid.
8. Identification of Rights and Payment Terms:
   • Each party’s rights concerning the goods or services and the payment terms must be clearly identifiable.
9. Commercial Substance:
   • The contract must have commercial substance, meaning it results in a change in the entity’s cash flows.
10. Probability of Collection:
    • It must be probable that the entity will collect the consideration to which it is entitled in exchange for the goods or services.

Special Considerations:

1. Contracts Failing to Meet Criteria:
   • If the criteria are not met, the entity must continue to reassess the contract until the criteria are satisfied.
2. Exceptions to IFRS 15:
   • Certain contracts are excluded from IFRS 15, such as leases, insurance contracts, financial instruments, guarantees, and specific non-monetary exchanges.
   • Sales of non-monetary assets like property, plant, and equipment may still follow some of IFRS 15’s requirements.
3. Partially Covered Contracts:
   • If a contract falls partially within IFRS 15 and partially under another standard, entities should apply the separation and measurement requirements of the other standard first, and the remaining transaction price will then follow IFRS 15.