Supply Chain Finance (SCF)
Faster payments for suppliers and better deals and reliable deliveries for buyers. It's a win-win situation. Important to understand IFRS 15 vs ASC 606 if you are dealing with USA and other international SCF. Proper guidance from our team at VKR Global, companies can leverage SCF's potential while mitigating risks and ensuring accurate financial reporting.
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ASC 606 and IFRS 15 are both accounting standards that guide how companies recognize revenue from contracts with customers.
Both standards use a five-step model to determine when and how much revenue to recognize. These steps involve identifying the contract, identifying the performance obligations, determining the transaction price, allocating the transaction price to the performance obligations, and recognizing revenue as the obligations are satisfied.
Presentation of Revenues | ASC 606 allows companies to present certain types of revenue separately from gross sales, while IFRS 15 generally requires all revenue to be presented as part of gross sales.
Shipping and Handling Activities | S&H rep a separate performance obligation under IFRS. Not separate for ASC 606
Determine the transaction price: Measurement date for noncash consideration| No guidance for IFRS. For ASC 606 is the contract inception date
Determine the transaction price: Sales taxes | ASC 606 excludes from the measurement of transaction price all taxes assessed by a governmental authority that are both imposed on and concurrent with the specific revenue-producing transaction and collected by the company from a customer - e.g. sales, use, value-added and some excise taxes. IFRS 15 is more open based on assessment.
Contract costs: Reversal of previously impaired assets arising from costs to obtain or fulfil a contract, when the impairment conditions cease to exist | IFRS 15 this is required. ASC 606 this is prohib
(For a fuller explanation refer https://kpmg.com/us/en/articles/2022/revenue-accounting.html):
