2019 September IAI PSAK 72

PSAK 72
Revenue from
Contracts with
Customers
11
Background of the Revenue
Recognition Project
2
Revenue recognition project objective
Joint Project
IASB FASB
But
why?
Clarify principles
Develop a common revenue standard
3
Are current standards not adequate?
Existing Standards Objective of project
• Limited guidance on certain topics • A more robust framework for

addressing revenue
• Sheer volume of accounting
recognition issues
guidance when referring to recent
pronouncements of other
standard-setting bodies that use a • Streamlining the volume of
similar conceptual framework – accounting guidance
US GAAP
• Removing inconsistencies
• Inconsistencies exist under
current requirements
• Improving comparability
• Lack of comparability across
companies, industries and capital • Improved disclosure
markets requirements
• Lack of useful disclosures
4
Revenue recognition overview
Construction
Services Software
Products
Apply one single, principle-based revenue recognition model
5
What are the key changes?
Key areas:
Unbundling of contracts
Allocation of total revenue to the unbundled parts
Uncertain revenue or variable consideration
Recognition of revenue at a point of time or over time
More extensive disclosure requirements
6
Which industries are significantly impacted?
PSAK [72]
The most impacted industries:

• Telecom
• Contract manufacturing
• Software Industry
• Real estate (specifically apartment block
building)
• Others (to evaluate based on nature of
business and contracts)
7
Key differences between current and new
standard
Key areas:
Telecom industry: Unbundle contracts, discounts, subscriber

acquisition costs, handset costs
Contract manufacturing industry: Unbundle contracts, progress
payments, performance obligations satisfied over time or at a point in
time
Software industry: Unbundle contracts and allocate the transaction
price, recognize revenue over time or at a point in time
Construction industry: Recognition of revenue over time or at a point
in time
8
The following illustrates the
potential impact of the adoption
of PSAK 72 on specific diagram
industries:
Understanding the core approach
Core principle:
Recognise revenue to depict the transfer of goods or services

to customers in an amount that reflects the consideration to
which the entity expects to be entitled in exchange for those
goods or services
Steps to apply the core principle:

5. Recognise
2. Identify 4. Allocate revenue when(or
1. Identify 3. Determine
the separate the transaction as) a performance
the contract(s) the transaction
performance price obligation is
with the customer price
obligations satisfied
10
1. Identify the 2. Identify 3. Determine 5. Recognize
contract performance transaction price revenue when/as
obligations performance
obligation is
4. Allocate
satisfied
transaction price
Deliver CU 100 When delivered

equipment
Provide
When
training CU 5
Contract with performed
services
customer
Provide
ongoing CU 4 When provided
services
Provide
CU 1 When provided
warranty
11
Watch out for the following …
New or more detailed rules/guidance on the following areas
Contract Unbundling Allocating revenue

modifications multiple elements between elements
Time value of Variable Treatment of

money consideration credit risk
Revenue Detailed
Capitalising costs
recognition at a implementation
of obtaining a
point in time or contract guidance
over time
12
Disclosure requirements
Overall objective:
Enable users of financial statements to understand the nature, amount, timing and
uncertainty of revenue and cash flows arising from contract with customers.
Information about
contracts with
Information about customers
costs to obtain or Information about
fulfill a contract judgment used
Disclosures
Information about
Disaggregation of
performance
revenue
obligation
Information about
contract balances
13
Transition methods
Retrospective application with

transitional reliefs
Modified approach
• Effects of initial application adjusted to opening retained earnings at
effective date.
• No restatement of comparatives.
• Early adoption permitted

14
Transition methods
15
Understanding the new
concepts and implications
16
Core principle:
Recognise revenue to depict the transfer of goods or services to customers in an amount that
reflects the consideration to which the entity expects to be entitled in exchange for those goods or
services
Steps to apply the core principle:

5. Recognise
2. Identify 4. Allocate revenue when(or
1. Identify 3. Determine
the separate the transaction as) a performance
the contract(s) the transaction
performance price obligation is
with the customer price
obligations satisfied
• Apply on a contract-by-contract basis
• Portfolio approach may be allowed if impact not expected to be materially

different from contract-by-contract basis (p. 19, 22)
17
Step 1 - Identify
the contract(s) with the
customer
18
Step 1: Identify the contracts with the customer
The model does not apply to The model does provide

scoped out topics guidance on
• Lease contracts (PSAK 73) • Identifying a contract

• Insurance contracts (PSAK 72) • When one or more contracts
should be combined into a single
• Certain contractual rights or
analysis for accounting purposes
obligations (within scope of
PSAK 71) • How to deal with contract
modifications – changes in
• Non-monetary exchange between
contract scope, price or both
entities in same line of business
whose purpose is to facilitate a
sale to another party (p. 22)
19
Step 1: Identify the contracts with the customer….p44
(4) Commercial
substance
(5) Intent to (1) Approved
Enforce by parties to
Contractual the contract
rights
Apply PSAK [72]
only when ALL six
criteria are met.
(6) Parties are (2) Can
committed to identify each
perform party’s right
(3) Can identify

payment terms
20
Question: Would PSAK [72] apply to these scenarios?....(p.22, 23)
Consider…
Scenario 4
Non-monetary Scenario 2
Scenario 1 exchanges Non-financial asset
Where wholly between entities supplied not an
unperformed to facilitate sales output from ordinary
contract can be to customers activities? E.g. sale
terminated without of PPE
penalty?
Scenario 3
Transactions with
collaborators/partners?
Meet definition as
“customers”?
21
Question: How do we account for a contract which includes multiple

deliverables covered by different PSAKs?
Apply separation and initial

measurement in other
applicable PSAK first
PSAK [72]
Revenue
Residual
Model amount
22
Question: When should one or more contracts be combined as one single

contract?
Example: Contract submits one bid for construction of a motorway and a

bridge at one end, with 2 counterparties who are related
Consider…
 Enter with same counterparty (or related parties) at or near same time
 Negotiated as a package with single commercial objective?
 Price for one contract depends on price / performance of another?
 Goods and services promised are a single performance obligation?
23
Contract modifications………………p 176
Question: Some contracts may be modified during the period of the

contract term. How should modification be accounted for?
Let’s look at an example…

At inception
Entity contracts with customer for delivery of 120 units @ $100 each over 10
months.
Promises Delivers Promises Delivers

120 units 30 more
@ $100 60 units by units @ 60 units by
each 3rd month $95 each 6th month
Reporting dates (RD) 1 2 3

24
Contract modifications…………………p 175
Possible accounting outcomes?
Outcome 1 Outcome 2 Outcome 3
Separate contract Retrospective Prospective
Cumulative Cumulative Cumulative

revenue revenue revenue
• At RD1 • At RD1 • At RD1
60 x $100 = $6,000 60 x $100 = $6,000 60 x $100 = $6,000
60 x $100 = $6,000 60 x $99* = $5,940 60 x $100 = $6,000
120 x $100 = 120 x $99* = 60 x $100 + 60 units
$12,000 $11,880 x $98.33^ = $11,898
• At End • At End • At End
120 x $100 + 150 x $99* = 60 x $100 + 90 x
30 x $95 = $14,850 $14,850 $98.33^ = $14,850
* (120 x $100 + 30 x $95) / ^ (60 x $100 + 30 x $95) /

150 units 90 units
25
Contract modifications (after proposed refinement) p 175
Does the modification add deliverables and increase contract

price by « normal » price that customer would pay for them?
No Yes
Would remaining deliverables qualify as

Treat as separate contract
distinct?
No Yes
Account Account
retrospectively prospectively
Will need to be assessed on facts and circumstances, but modifications for

 Construction contracts generally retrospective
 Other contracts generally prospective
26
How will you be impacted?
Preliminary thoughts
General:
• Scope of revenue proposals – Important to distinguish between lease
arrangements and service revenues within scope of the final standard.
Telecommunications:
• Contract modification – Complex arrangements with multiple service
offerings frequently added and removed at discount
o Examples: Premium content TV channel given for a period for free to
customer who has made a complaint to customer services, customer
upgrade to higher broadband speed mid-contract for a fee etc
o Contract modifications may be challenging to track given the sheer number of
retail customers
27
Construction/Shipbuilding/Services:
• Contract modification – Variation orders are very common
o Contract modifications may be ‘non-standard’ and may require closer
evaluation
o Contract modifications may be to both price and scope
28
Step 2 - Identify
the separate performance
obligations (“POs”)
29
What is a Performance Obligation?
A promise in a
contract with a Perform a
Construct customer to contractually
an asset transfer a good or agreed task
service to the
customer
Broker a
sale
between
Sale of Grant a different
goods parties
license
Important
The satisfaction of a performance obligation triggers recognition of revenue in Step 5.
Particularly important when a single contract has multiple performance obligations.
30
Step 2: Identify separate performance obligations……p.54.
Identify all promised goods and services in the contract
After proposed Or together with

refinement other readily
available resources
Are there Yes Can customer Is the good or

multiple goods Yes
benefit from good service separable
or services or service on its from other
promised in the own? promises in the
contract? contract?
Yes
No No No
Account for the

Combine performance obligations
Treat as a single separate
until two or more performance
transaction performance
obligations are distinct
obligation
31
Step 2: Identify separate performance obligations
Goods/services are separable from

other promises in the contract if, for
example:
32
Example – Software Industry
Software is highly
customised and the
add-on service are
Sells a software necessary to utilise
licence and provides the software
consulting services
for customising the
software
Entity A Customer Y
CU600,000
Current practice: Unbundle the licence from the add-on services
New practice: The licence and professional services may be

considered a single perfomance obligation and revenue for the
arrangement will be recognised over the service period.
(Rationale = not separable)
33
Telecommunications:
• Identify performance obligations – Revenue allocation to equipment (e.g.
handsets, set-top boxes etc)……..(distinct...p.61-67)
o Potential acceleration of revenue recognition and related tax implications?
o Disconnect between cashflows and revenue?
34
Identify the performance obligations
Kyber-Comm operates in the telecommunications and media industry. As a network operator, Kyber-
Comm enters into a standard 24-month contract with its customer to provide mobile network services,
including a free handset that is gives to the customer at contract inception.
The customer can benefit from the handset together with resources that are readily available to them, in
other words, the usage of the handset is not dependent on the network connection services and the
customer could sign up with another network service provider.
Kyber-Comm has also historically provided free handset maintenance services for the duration of the
contract to its customers, however, Kyber-Comm does not explicitly promise maintenance services during
negotiations with the customers, nor does the final contract between itself and the customers specify
terms or conditions for those services.
Choose one answer and then write in the box provided
1. The contract comprises three separate performance obligations: transfer of the handset, provision of
network connection services, and implicit provision of maintenance services.
2. As the handset is given for free, it is not a separate performance obligation.
3. As the provision of the maintenance service is not explicitly stated in the contract with the customer, it
is not a separate performance obligation.
4. The whole contract consists of one performance obligation.
5. The handset together with the network services from one performance obligation.
35
Barang dan jasa yang dapat dipisahkan
Kyber-Comm menjalin kontrak dengan pelanggan untuk menyediakan lisensi software, jasa pelatihan
penggunaan software, pembaharuan software dan jasa bantuan teknis selama dua tahun.
Jasa pelatihan, pembaharuan software dan jasa bantuan teknis sifatnya pilihan dan terpisah dari lisensi
software, namun untuk pembaharuan software di ekspektasi akan sering terjadi dan penting untuk
menjamin kelangsungan penggunaan software oleh pelanggan. Jasa pelatihan software bersifat generik
untuk sebagian besar produk lisensi software yang ditawarkan oleh Kyber-Comm.
Diidentifikasi kemungkinan terdapat empat tipe barang dan jasa dalam kontrak ini, yaitu:
1. Lisensi software
2. Jasa pelatihan
3. Pembaharuan software
4. Jasa bantuan teknis.
Mana yang benar? Tulis jawaban saudara dalam kotak yang disediakan
1. Lisensi software and pembaharuan software merupakan satu kewajiban kontrak.

2. Lisensi software and jasa training awal merupakan satu kewajiban kontrak.
3. Masing-masing dari ke empat tipe barang dan/atau jasa yang didentifikasi di atas merupakan
kewajiban kontrak yang terpisah.
4. Secara keseluruhan terdapat satu kewajiban kontrak.
5. Jasa training, pembaharuan software dan bantuan teknis merupakan satu kewajiban kontrak
karena ketiganya tidak menjadi bagian dari lisensi software dan dapat dibeli secara terpisah dari
lisensi software.
36
Manufacturing/Software sales/Consumer business

• Identify performance obligations….(warranties….p.78)
o Sale of goods and post sales service and support
o Warranties
→ Are these separate performance obligations?
Consumer business:
• Identify performance obligations – customer incentives in connection with
sales of a good e.g. “Buy one get one free”……….(material right…..p.70)
→ Are each separate performance obligations?
37
Recognition of revenue related to options that do not expire – single customer option
Example (p. 102)
An entity enters into a contract with a customer for the sale of Product A for CU100. As part
of the negotiated transaction, the customer also receives a coupon for 50 per cent off the
sale of Product B; the coupon does not expire. Similar coupons have not been offered to
other customers.
The entity concludes that the option to purchase Product B at a discount of 50 per cent
provides the customer with a material right. Therefore, the entity concludes that
(1) this option is a performance obligation, and
(2) a portion of the transaction price should be allocated to this option.
The stand-alone selling price of Product B is CU60. The entity estimates a 70 per cent
likelihood that the customer will redeem the coupon. On the basis of the likelihood of
redemption, the stand-alone selling price of the coupon is estimated to be CU21 (CU60 sales
price of Product B × 50 per cent discount × 70 per cent likelihood of redemption).
At contract inception, the entity allocates the CU100 transaction price as follows.
•• Product A = CU83 (CU100 × CU100 stand-alone selling price ÷ CU121)
•• Product B = CU17 (CU100 × CU21 stand-alone selling price ÷ CU121)
The option is not exercised during the first four years after its issuance and no revenue is
recognised in relation to the material right. At the end of Year 4, the entity determines that
the likelihood the customer will redeem the coupon has become remote and recognises the
CU17 as revenue.
Step 3 - Determine the
transaction price
39
Step 3: Determine the transaction price
Transaction price =
Amount of consideration to which
an entity expects to be entitled in
exchange for transferring promised
goods or services to a customer
Consider the effects of:
• Variable consideration (e.g. estimate value at contract inception)

• The time value of money (e.g. discount if financing component is
significant)…..see p. 110.
• Non-cash consideration…p.124.
• Consideration payable to a customer
Reassess and update estimated transaction price at each reporting date

40
Entitlement to non-cash consideration
Example (p. 102)
An entity enters into a contract with a customer to provide a weekly service for one year. The
contract is signed on 1 January 20X1 and work begins immediately. The entity concludes
that the service is a single performance obligation. This is because the entity is providing a
series of distinct services that are substantially the same and have the same pattern of
transfer (the services transfer to the customer over time and use the same method to
measure progress – that is, a time-based measure of progress).
In exchange for the service, the customer promises 100 shares of its common stock per
week of service (a total of 5,200 shares for the contract). The terms in the contract require
that the shares must be paid upon the successful completion of each week of service.
The entity measures its progress towards complete satisfaction of the performance obligation
as each week of service is complete. To determine the transaction price (and the amount of
revenue to be recognised), the entity measures the fair value of 100 shares that are received
upon completion of each weekly service.
The entity does not reflect any subsequent changes in the fair value of the shares received
(or receivable) in revenue.
Variable consideration
• Consideration often varies due to discounts, rebates, refunds,
credits, incentives, performance bonus/penalty, contingencies,
price concessions, or similar items.
• Probability-weighted (expected values) or most likely amount

of consideration that the entity is entitled to from the customer,
depending on which method is the most predictive of the amount of
consideration the entity will be entitled.
• Constraint to be applied to limit revenue recognition to the

extent it is highly probable that no significant reversal will
occur.
42
Example (p. 102)
Constraint on variable consideration assessed at the contract level
An entity enters into a contract with a customer to provide equipment and consulting services. The contract price for the
equipment is CU10 million. The consulting services are priced at a fee of CU100,000, of which CU55,000 is fixed and
CU45,000 is contingent on the customer reducing its manufacturing costs by 5 per cent over a one-year period. It is also
concluded that:
•• the equipment and the consulting services are separate performance obligations; and
•• the stand-alone selling prices of the equipment and consulting services are CU10 million and CU100,000
respectively.
The entity believes there is a 60 per cent likelihood that it will be entitled to the performance-based element of the consulting
services fee. As a result, using the most likely amount approach the entity estimates the amount of the variable consideration
as CU45,000. The transaction price of the contract before considering the constraint is, therefore, CU10.1 million.
The entity then considers the constraint to determine if it is highly probable that a significant reversal in the amount of
cumulative revenue recognized will not occur. The entity considers both the likelihood and magnitude of a revenue reversal at
the contract level.
Discussion:
There is a 40 per cent chance that the contingent consulting services fee of CU45,000 will not be receivable. Accordingly, the
entity concludes that it is not highly probable that it will be entitled to the variable consideration. However, the significance of
the potential revenue reversal of CU45,000 is evaluated in the context of the contract as a whole (CU45,000 as a
proportion of the transaction price, CU10.1 million, i.e. 0.45%) and not the performance obligation (CU45,000 as a
proportion of the amount assigned to the performance obligation, CU100,000, i.e. 45%). Therefore, the entity concludes that
all of the variable consideration should be included in the transaction price, because it is highly probable that no
significant revenue reversal will occur.
Example (p. 106)
Volume discount incentive
An entity enters into a contract with a customer on 1 January 20X8 to sell Product A for CU100 per unit. If the
customer purchases more than 1,000 units of Product A in a calendar year, the contract specifies that the price per unit
is retrospectively reduced to CU90 per unit. Consequently, the consideration in the contract is variable.
For the first quarter ended 31 March 20X8, the entity sells 75 units of Product A to the customer. The entity estimates
that the customer’s purchases will not exceed the 1,000-unit threshold required for the volume discount in the calendar
year. The entity considers on constraining estimates of variable consideration. The entity determines that it has
significant experience with this product and with the purchasing pattern of the entity. Thus, the entity concludes that it
is highly probable that a significant reversal in the cumulative amount of revenue recognised (ie CU100 per unit) will
not occur when the uncertainty is resolved (ie when the total amount of purchases is known). Consequently, the entity
recognises revenue of CU7,500 (75 units × CU100 per unit) for the quarter ended 31 March 20X8.
In May 20X8, the entity’s customer acquires another company and in the second quarter ended 30 June 20X8. The
entity sells an additional 500 units of Product A to the customer. In the light of the new fact, the entity estimates that the
customer’s purchases will exceed the 1,000-unit threshold for the calendar year and therefore it will be required to
retrospectively reduce the price per unit to CU90.
Consequently, the entity recognises revenue of CU44,250 for the quarter ended 30 June 20X8. That amount is
calculated from CU45,000 for the sale of 500 units (500 units × CU90 per unit) less the change in transaction price of
CU750 (75 units × CU10 price reduction) for the reduction of revenue relating to units sold for the quarter ended 31
March 20X8.
Time value of money
• Transaction price adjusted for time value of money if contract includes a significant financing
component (stated or implied by the payment terms) e.g. indicators:
- variance in amounts,
- payment timing lag,
- explicit/implicit interest rate
• Practical expedient - where difference between performance and payment is 1 year of less.
Example (p. 109)…………Requirement to discount trade receivables

Entity A, a retailer, offers interest-free financing to its customers. The financing arrangement gives the customer interest-free
financing for a period of 12, 15 or 18 months. This is common industry practice in the country where Entity A is located, and other
retailers offer similar financing arrangements. No recent cash transactions are available from which Entity A can make a reliable
estimate of the cash sales price. On the basis of prevailing interest rates in the relevant market, Entity A estimates that the customer
would be able to borrow from other sources at an interest rate of 18 per cent. Entity A believes that as a result of the combination of
(1) the length of time between the transfer of goods and payment, and (2) the high interest rates at which the customer can obtain
financing, the arrangement contains a significant financing component.
Is Entity A required to adjust the transaction prices in all its interest-free financing sale arrangements to reflect the effects of the time
value of money?
Entity A is required to adjust the promised amount of consideration even when a significant financing component is not
explicitly identified in the contract. However, the standard provides a practical expedient for contracts with a significant
financing component when the period between the transfer of goods and the customer’s payment is, at contract inception,
expected to be one year or less. Consequently, in the circumstances described, Entity A is required to adjust the sales price for all
arrangements other than those with a contractual period of 12 months or less. For arrangements with a contractual period of 12
months or less, Entity A is permitted to adjust the sales price when it identifies a significant financing component, which it may wish to
do to align with its other contracts; however, it is not required to do so. If Entity A takes advantage of the practical expedient under
IFRS 15:63, it is required to do so consistently in similar circumstances for all contracts with similar characteristics.
45
Example (p. 106)
What level the “significance” of a financing component should be assessed?
IFRS 15:61 specifically requires an entity to consider all relevant facts and circumstances in assessing whether a
contract contains a financing component and whether that financing component is significant to the contract.
Consequently, the significance of a financing component should be assessed in the context of the individual
contract rather than, for example, for a portfolio of similar contracts or at a performance obligation level.
Although a financing component can only be quantified by considering individual performance

obligations, the significance of a financing component is not assessed at the performance obligation
level.
To illustrate, an entity may typically sell Product X, for which revenue is recognised at a point in time, on extended
credit terms such that, when Product X is sold by itself, the contract contains a significant financing component.
The entity may also sell Product X and Product Y together in a bundled contract, requiring the customer to pay for
Product Y in full at the time control is transferred but granting the same extended credit terms for Product X. If the
value of Product Y is much greater than the value of Product X, any financing component in respect of Product X
may be too small to be assessed as significant in the context of the larger bundled contract.
Therefore, in such circumstances, the entity would:

•• adjust the promised consideration for a significant financing component when Product X is sold by itself; but
•• not adjust the promised consideration for a significant financing component when Product X is sold
together with Product Y in a single contract.
Step 3: Determine the transaction price……p 117
Time value of money (advance payment)
• Contract to sell Product A, with upfront

Entity Customer cash receipts of CU37,500
• Delivery in 2 years
• Entity’s incremental borrowing rate is 6
Applicable journal entries: per cent
• Dr Cash CU37,500
Cr Contract liability CU37,500
[Recognition of contract liability upon cash receipt]
• During the two years from contract inception until the transfer of Product A:
Dr Interest expense CU4,635 [CU37,500 × (1.062 – 1)] Tentative decision: no
Cr Contract liability CU4,635 discounting needed in this
[Recognition of interest expense on upfront payment] case if timing of transfer of
goods or services is at
• Dr Contract liability CU42,135 discretion of customer
Cr Revenue CU42,135
[Recognise revenue for the transfer of Product A at end of 2 years]
47
Time value of money
Circumstances that do not give rise to a significant financing component
a) The customer paid for the goods or services in advance and the timing of the
transfer of those goods or services is at the discretion of the customer;
b) A substantial amount of the consideration promised by the customer is
variable and the amount or timing of that consideration varies on the basis of
the occurrence or non-occurrence of a future event that is not substantially within
the control of the customer or the entity (e.g. if the consideration is a sales-based
royalty); or
c) The difference between the promised consideration and the cash selling
price of the good or service arises for reasons other than the provision of
finance to either the customer or the entity, and the difference between those
amounts is proportional to the reason for the difference. For example, the payment
terms might provide the entity or the customer with protection from the other party
failing adequately to complete some or all of its obligations under the contract.
48
Time value of money
Determining the discount rate…….p.116.
An entity enters into a contract with a customer to sell equipment. Control of the equipment transfers to the customer when
the contract is signed. The price stated in the contract is CU1 million plus a five per cent contractual rate of interest, payable
in 60 monthly instalments of CU18,871.
Case A – Contractual discount rate reflects the rate in a separate financing transaction
In evaluating the discount rate in the contract that contains a significant financing component, the entity observes
that the five per cent contractual rate of interest reflects the rate that would be used in a separate financing
transaction between the entity and its customer at contract inception (ie the contractual rate of interest of five per cent
reflects the credit characteristics of the customer). The market terms of the financing mean that the cash selling price of the
equipment is CU1 million. This amount is recognised as revenue and as a loan receivable when control of the equipment
transfers to the customer.
Case B – Contractual discount rate does not reflect the rate in a separate financing transaction
In evaluating the discount rate in the contract that contains a significant financing component, the entity observes that the
five per cent contractual rate of interest is significantly lower than the 12 per cent interest rate that would be used in a
separate financing transaction between the entity and its customer at contract inception (ie the contractual rate of interest of
five per cent does not reflect the credit characteristics of the customer). This suggests that the cash selling price is less than
CU1 million. The entity determines the transaction price by adjusting the promised amount of consideration to reflect the
contractual payments using the 12 per cent interest rate that reflects the credit characteristics of the customer.
Consequently, the entity determines that the transaction price is CU848,357 (60 monthly payments of CU18,871 discounted
at 12 per cent). The entity recognises revenue and a loan receivable for that amount. .
49
Non-cash consideration
• Measure the non-cash consideration at fair value
• If cannot reasonably estimate the fair value of the non-cash consideration,
measure the consideration indirectly by reference to the stand-alone selling price
of the goods or services promised.
Goods and services contributed by customers

• Assess if entity obtains control of those contributed goods or services.
• If so, account for the contributed goods or services as non-cash consideration
received from the customer
Consideration payable to customer

• E.g. volume discount incentives
• Generally a reduction in transaction price, unless amounts payable is for distinct
good or service from the customer
• Specific guidance on situations where amount payable exceeds fair value of
distinct good or service from the customer, or when fair value cannot be
reasonably estimated
50
Technology industries:
• Variable consideration (e.g. royalties from use of license pegged to future
sales by customer)
o Clearer guidance on variable consideration in proposals → will this change
future timing and amount of revenue recognised?
Asset management industries:
• Variable consideration (e.g. performance-based fees)
o Clearer guidance on variable consideration in proposals → will this change
future timing and amount of revenue recognised?
51
Telecommunications:
• Revenue allocation to equipment (e.g. handsets, set-top boxes etc)
o Time value of money – a handset or set-top box provided to customer for a
2 year monthly-paid contract → is this a deferred payment ‘revenue stream’?
Construction/Shipbuilding/Services industries:
• Time value of money – long-term contracts if on ‘deferred payment’ terms
o Any significant financing component → Impacting amount of sales revenue
and interest component?
52
Step 4 - Allocate transaction
price to separate performance
obligations
53
Step 4: Allocate transaction price
Allocate revenue between elements based on standalone selling

price of each separate performance obligation
Standalone Observable price at which an entity would sell a

selling price promised good or service separately to a customer
If not directly observable, standalone

selling price shall be estimated
 Residual approach allowed in certain (limited) circumstances

 Otherwise, discount and variable consideration allocated pro
rata to standalone selling price
 Practical expedient: Portfolio approach
54
An entity shall allocate the transaction price to each performance

obligation in an amount that depicts the amount of consideration to
which the entity expects to be entitled in exchange for satisfying each
performance obligation.
Allocation of transaction price to multiple performance obligations

• Allocate transaction price on a relative standalone selling price basis.
• Estimate standalone selling price if not observable e.g.
o Expected cost-plus margin;
o adjusted market assessment; or
o residual (when standalone price is highly variable or uncertain).
55
Allocating discount to separate performance obligations (1/2)
• An entity enters into a contract with a

customer to sell Products A, B and C for
Entity Customer a total transaction price of CU36.
• The entity regularly sells Products A, B and C on a stand-alone basis for the following
prices:
Stand-alone
selling prices
CU
Product A 9
Product B 11
Product C 20
Total 40
• The customer receives a CU4 discount (CU40 sum of stand-alone selling prices – CU36
transaction price) for buying the bundle of three products.
56
Allocating discount to separate performance obligations (2/2)
• The entity accounts for 3 separate performance obligations for Products A, Product B and
Product C.
• The entity does not have observable prices as evidence that the CU4 discount in the
contract applies only to a particular product(s).
• The discount would be allocated to each product based on their relative standalone selling
prices.
• Hence, the entity allocates the transaction price of CU36 as follows:
Stand-alone
selling prices
CU
Product A 8.1
Product B 9.9
Product C 18.0
Total 36.0
57
Example – Telecom industry
Differences in allocation of transaction price between current and
new practice
Facts
Operator A sells mobile handsets and wireless services to their
customers. They offer two different packages:
Package 1 Package 2
• Handset X for free • Handset X SUPER PLUS for CU
• Wireless service CU 40 per month 150
over a two-year contract • Wireless service CU 40 per month
• Total price of CU 960 over a two year contract
• Total price of CU 1,110
Standalone selling price for handset X is CU 250

Standalone selling price for handset X SUPER PLUS is CU 400
58
Example – Telecom industry
Illustration:
Differences in allocation of transaction price between current and new practice
1200
1000
392
480
800
Revenue
381 Wireless service

480
(Yr 2)
600
392 Wireless service
400 381 480 (Yr 1)
480 Handset service

200
326 (Yr 1)
198 150
0 0
Package 1 Package 1 Package 2 Package 2
Current New Current New
Note: The current practice is somewhat divergent

59
Step 5 - Recognise revenue
when performance obligations
are satisfied
60
Step 5: Recognise revenue when performance
obligations are satisfied
Recognize revenue when (or as) the entity satisfies a performance obligation by
transferring a promised good or service to a customer. An asset is transferred
when the customer obtains control of that asset.
Control:
• Ability to direct the use of an asset;
• Obtain substantially all of the
remaining benefits from that asset
• Ability to prevent other entities from
directing the use of and obtaining
benefits from an asset
The previous standard utilized the concept of risks and rewards, whereas PSAK 72 utilizes the concept
of the transfer of control in all cases. It might possible in some circumstances for entities to have a
61
different pattern of revenue recognition based on the both concepts.
Step 5: Recognise revenue when performance
obligations are satisfied (after proposed refinement)
Performance satisfied over time = Revenue recognized over time
Seller creates an
Customer receives asset that does not
Seller’s performance and consumes have alternative use
creates or enhances OR benefits of the entity’s OR to seller and the
asset controlled by performance as the seller has right to be
customer entity performs paid for performance
completed to date
IF NOT = Revenue recognized at a point in time

No practical expedients are available that would permit, for example for contracts with a short duration
(e.g. less than a year), simply defaulting to point-in-time recognition
62
Consider…..p.150
An entity enters into a contract with a customer to provide a consulting service that results in the entity providing a
professional opinion to the customer. The professional opinion relates to facts and circumstances that are specific to
the customer. If the customer were to terminate the consulting contract for reasons other than the entity’s failure to
perform as promised, the contract requires the customer to compensate the entity for its costs incurred plus a 15 per
cent margin. The 15 per cent margin approximates the profit margin that the entity earns from similar contracts.
The entity considers whether the customer simultaneously receives and consumes the benefits of the entity’s
performance. If the entity were to be unable to satisfy its obligation and the customer hired another consulting firm to
provide the opinion, the other consulting firm would need to substantially re-perform the work that the entity had
completed to date, because the other consulting firm would not have the benefit of any work in progress performed by
the entity. The nature of the professional opinion is such that the customer will receive the benefits of the entity’s
performance only when the customer receives the professional opinion. Consequently, the entity concludes
performance obligation meets the criterion satisfied over time because of both of the following factors:
(a) the development of the professional opinion does not create an asset with alternative use to the entity because
the professional opinion relates to facts and circumstances that are specific to the customer. Therefore, there is a
practical limitation on the entity’s ability to readily direct the asset to another customer.
(b) the entity has an enforceable right to payment for its performance completed to date for its costs plus a
reasonable margin, which approximates the profit margin in other contracts.
Consequently, the entity recognises revenue over time by measuring the progress towards complete
satisfaction of the performance obligation.
63
Example……..5-Step Revenue From Contract with a Customer
Example (p. 102)
Johnny enters into a 12-month telecom plan with the local mobile operator ABC. The terms of plan are as follows: Johnny’s
monthly fixed fee is CU 100. Johnny receives a free handset at the inception of the plan.
ABC sells the same handsets for CU 300 and the same monthly prepayment plans without handset for CU 80/month. How
should ABC recognize the revenues from this plan in line with previous and new PSAK ?
Current rules say that ABC should apply the recognition criteria to the separately identifiable components of a single
transaction (here: handset + monthly plan). However, no guidance on how to identify these components and how to allocate
selling price and as a result, there were different practices applied.
For example, telecom companies recognized revenue from the sale of monthly plans in full as the service was provided, and
no revenue for handset – they treated the cost of handset as the cost of acquiring the customer. Some companies
identified these components, but then limited the revenue allocated to the sale of handset to the amount received from
customer (zero in this case). This is a certain form of a residual method (based on US GAAP’s cash cap method).
Let’s assume that ABC recognizes no revenue from the sale of handset, because ABC gives it away for free. The cost of
handset is recognized to profit or loss and effectively, ABC treats that as a cost of acquiring new customer. Revenue from
monthly plan is recognized on a monthly basis. The journal entry is to debit receivables or cash and credit revenues with CU
100.
Revenue under PSAK 72

ABC needs to identify the contract first (step 1), which is obvious here as there’s a clear 12-month plan with Johnny. Then,
ABC needs to identify all performance obligations from the contract with Johnny (step 2 in a 5-step model):
1. Obligation to deliver a handset.
2. Obligation to deliver network services over 1 year
The transaction price (step 3) is CU 1 200, calculated as monthly fee of CU 100 times 12 months. Now, ABC needs
to allocate that transaction price of CU 1 200 to individual performance obligations under the contract based on their
relative stand-alone selling prices (or their estimates) – this is step 4.
The step 5 is to recognize the revenue when ABC satisfies the performance obligations. Therefore:
Example (p. 102)
1. When ABC gives a handset to Johnny, it needs to recognize the revenue of CU 285.60;
2. When ABC provides network services to Johnny, it needs to recognize the total revenue of CU 914.40. It’s practical
to do it once per month as the billing happens.
Example – Real estate development
Question: Would the proposed criteria affect accounting for sale of

uncompleted units of real estate by developers currently under PSAK 72?
Unit #08-01
Customer Developer
66
Example – Real estate development
Key features
• Non-refundable deposit at inception
• Progressive payments schedule to
compensate for work done, refundable
only if developer fails to perform
• Customer borrows from bank which
pays direct to developer
• Customer can sell interest in the
partially completed unit
Consider… • Customer can make minor modification
• Right to payment? • Developer cannot transfer unit to
• Reasonable margin? another customer
• Asset with alternative use to
• Customer takes physical possession
developer?
only upon completion of construction
67
Example - Construction
Question: Would the proposed criteria change the percentage-of-

completion accounting by contractor for construction of large machinery
and equipment currently under previous standard?
Apply similar considerations…
Customer Contractor
68
Example – Contract Manufacturing Industry
Single performance
obligation and
product cannot be
used by other
customers
Enter a contract
for manufacturing
customized
machinery No control on work
Entity X Customer A in progress
Right to payment
even if customer
A cancels the
Question contract
Should the revenue be recognized over time or at a point of time?

Answer
Revenue should be recognized over time.
69
Other guidance
Measuring progress towards complete satisfaction of a performance

obligation
• Objective is to depict the transfer of control of goods or services to the customer—

that is, to depict an entity’s performance
• Apply a method of measuring progress that is consistent with this objective
• Output methods – for example, surveys of performance completed to date, appraisals
of results achieved, milestones reached or units produced.
• Input methods – for example, resources consumed, labour hours expended, costs
incurred, time lapsed or machine hours used.
70
Construction/Real estate sales/Long-term service contracts:

• To recognise revenue over time or at a point-in-time
o Criteria under proposals appear to preclude purely ‘activity-based’ revenue
recognition, leading to revenue recognition only upon completion/delivery (i.e.
percentage of completion accounting may not be applicable in some cases)
Technology companies:
• Licence revenues
o More specific guidance for recognition of license revenue
o Likely to have more up-front recognition of license revenues when sale of
license is akin to sales of goods?
71
Consumer business/manufacturing (continued):

• Transfer of products to distributorships
o Currently, sale may not have been recorded if goods deemed to be on consignment to
distributor (‘risk and rewards’ argument)
o Under proposals, potentially ‘Control’ over goods may have transferred to distributor
even when risks and rewards retained → earlier revenue recognition?
72
Other guidance and new
disclosure requirements
73
Other guidance
Contract costs
Costs to obtain a contract
• Capitalised when and only when such costs are incremental to obtaining a
contract (e.g. sales commissions) and are expected to be recovered.
• Practical expedient – Allowed to expense off for contracts with expected

amortisation period of one year or less
Costs to fulfil a contract
• May be within scope of other PSAKs
• Capitalised when and only when:

 Relate directly to contract
 Generate/enhance resources used to satisfy obligations
 Expected to be recovered
74
Other guidance
Warranties
Customer has option to purchase warranty

Separately?
Yes
No
Treat as a
Does the warranty provide customer with a separate
service in addition to ‘assurance’? performance
Yes obligation
No
Account in accordance with PSAK 57
Provisions, Contingent Liabilities and
Contingent Assets
75
Other guidance
Licences of intellectual properties
2 possible types
Provide “access” to an
Transfer a “right to use”
intellectual property
(At one point in time)
(transfer over time)
Criteria provided to assess the nature of the promise

embodied
76
Other guidance
Implementation guidance
Implementation guidance also include other topics such as:
• Sale with a right of return
• Principal versus agent considerations (see example in the next slide)
• Customer options for additional goods or services
• Customers’ unexercised rights
• Non-refundable upfront fees
• Repurchase agreements
• Consignment arrangements
• Bill-and-hold arrangements
• Customer acceptance
• Disaggregation of revenue
77
Example (p. 31,32)
Example (p. 102)
Entity is a principal and an agent in the same contract
An entity sells services to assist its customers in more effectively targeting potential recruits for open job positions.
The entity performs several services itself, such as interviewing candidates and performing background checks.
As part of the contract with a customer, the customer agrees to obtain a licence to access a third party’s database
of information on potential recruits. The entity arranges for this licence with the third party, but the customer
contracts directly with the database provider for the licence. The entity collects payment on behalf of the third-
party database provider as part of the entity’s overall invoicing to the customer. The database provider sets the
price charged to the customer for the licence, and is responsible for providing technical support and credits to
which the customer may be entitled for service down time or other technical issues.
To determine whether the entity is a principal or an agent, the entity identifies the specified goods or
services to be provided to the customer and assesses whether it controls those goods or services before
they are transferred to the customer.
For the purpose of this example, it is assumed that the entity concludes that its recruitment services and the
database access licence are each distinct. Accordingly, there are two specified goods or services to be
provided to the customer – access to the third party’s database and recruitment services. The entity
concludes that it does not control the access to the database before it is provided to the customer. The entity does
not at any time have the ability to direct the use of the licence because the customer contracts for the licence
directly with the database provider. The entity does not control access to the provider’s database – it cannot, for
example, grant access to the database to a party other than the customer or prevent the database provider from
providing access to the customer.
Example (p. 31,32)
Example (p. 102)
Entity is a principal and an agent in the same contract
The entity concludes that these indicators provide further evidence that it does not control access to the
database before that access is provided to the customer:
(a) the entity is not responsible for fulfilling the promise to provide the database access service. The
customer contracts for the licence directly with the third-party database provider and the database provider is
responsible for the acceptability of the database access (for example, by providing technical support or
service credits).
(b) the entity does not have inventory risk because it does not purchase, or commit itself to purchase, the
database access before the customer contracts for database access directly with the database provider.
(c) the entity does not have discretion in setting the price for the database access with the customer
because the database provider sets that price.
Thus, the entity concludes that it is an agent in relation to the third party’s database service.
In contrast, the entity concludes that it is the principal in relation to the recruitment services because the
entity performs those services itself and no other party is involved in providing those services to the customer.
Other updates
Collectability
• Initial or subsequent impairment of customer receivables presented prominently as
expense in statement of comprehensive income.
Onerous provisions
• Exclude onerous test from scope of revised standard, i.e. apply PSAK 57 to
all contracts.
80
Overall objective:
Enable users of financial statements to understand the nature, amount, timing and
uncertainty of revenue and cash flows arising from contract with customers.
Information about
contracts with
Information about customers
costs to obtain or Information about
fulfill a contract judgment used
Disclosures
Information about
Disaggregation of
performance
revenue
obligation
Information about
contract balances
81
More extensive disclosures in the following areas:-
• Disaggregation of revenue to “depict how the nature, amount, timing and

uncertainty of revenue and cash flows are affected by economic factors”
• Changes in contract balances e.g. opening and closing balances of contract

assets and liabilities.
• Contracts extending beyond one year – aggregate amount of transaction

price allocated to the remaining performance obligation and explanation of
expected timing of revenue recognition.
• Contract costs – information about asset recognised for costs to obtain or

fulfil a contract
82
More extensive disclosures in the following areas:-
• Information about contracts - types of goods or services, significant

payment terms, typical timing of satisfying obligations
• Significant judgments about the amount and timing of revenue recognition
• Policy decisions made by entity related to practical expedients
• Information about methods, inputs and assumptions used to determine

transaction price and price allocation
Interim reporting - Disclosures limited to certain areas.
83
What are the challenges in
implementation?
84
Potential Impact to Financial Reporting
Need to revisit detail

Significant changes to of current policies in
timing/amount of light of significant
revenue recognition? increase in detailed
revenue guidance?
IMPACT ASSESSMENT
Financial information
Information system and links with internal
reporting
85
Impact Assessment Approach
The following summarises the key approach that companies could consider
in addressing the requirements of the PSAK [72].
Key activities
• Evaluate significant revenue streams
• Identify, evaluate and summarise key contracts Key issues Deliverables
• Capture and define key accounting issues and new • Definition of contract and • Evaluation of
policy requirements performance obligation contract types and
summary of issues
• Identify key data gaps, process requirements
• Variable pricing
• Assess opportunities to automate key accounting steps • Data gap
• Assess other potential system impacts • Allocation and identification
• Analyse / determine additional disclosure needs measurement of
performance • Accounting and tax
• Determine long-term training requirements
issue summary
• Bundled offers/services
• Operational issues
Revenue Streams/ Areas of Business Focus
(An Example) • Contract modifications and process changes
• Enterprise contracts
• Onerous contracts • Implementation
• Outsourced service arrangements roadmap and
workplan
• Wholesale telecom contracts • Disclosures/
• State-based telecom contracts presentation
86
Operational Considerations
Revenue Multiple billing and transaction systems service different
customer types and channels; many are likely impacted by
systems
the proposed revenue recognition rules
Commission Timing and amounts of revenue recognition may change,

and this may impact commissions to sales people
Impacts
There may be tax impact depending on how a jurisdiction

Taxation treats accounting profits
Internal New data and calculations necessities design and

Controls implementation of new/revised internal controls
Financial Extensive disclosures may warrant systems re-configuration

reporting
Reconciliation between PSAK and other reporting GAAPs
systems
87
Other operational considerations
• Changes to key performance indicators and other key metrics

• Availability of profits for distribution
• For compensation and bonus plans, impact of timing of targets being
achieved and likelihood of targets being met
• Potential non-compliance with loans covenants
88
Next steps and Q&As
89
Short Quiz
Question 1 – Identifying contracts with customer
All modifications to contract should be accounted for as a cancellation

of an existing contract and creation of a new contract for the
remaining obligations? True or False?
Question 2 - Identifying separate performance obligations
It is possible for two or more deliverables in a contract to be

accounted for as a single performance obligation. True of False?
Question 3a - Determining transaction price
Time value of money can be ignored if the timing between payment

and satisfaction of performance obligation is less than 1 year.
True of False?
90
Short Quiz
Question 3b – Determining transaction price
Variable consideration should be estimated in determining transaction

price . True or False?
Question 4 – Allocation of transaction price
Allocation of transaction price using a residual approach is not

allowed in all circumstances. True or False?
Question 5 - Recognition of revenue over time or one point in time
Revenue should only be recognised upon the customer receiving

physical possession of the promised goods. True of False?
91
Short Quiz
Question 6a – Others
Costs to obtain contracts with customer should always be expensed

when incurred. True or False?
Question 6b – Others
Warranty should be accounted for as expense under PSAK 57

Provisions, Contingent Liabilities and Contingent Assets, if it does not
represent an additional service. True or False?
92
Key Takeaways
• Impacts entities across all types of industries and businesses
• Changes to timing and measurement of revenue expected in some
cases
• Increased disclosures for most entities
• Practical expedients are available in several areas
93
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94

2019 September IAI PSAK 72

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PSAK 72

Existing Standards Objective of project

• Limited guidance on certain topics • A more robust framework for

• Lack of useful disclosures

Apply one single, principle-based revenue recognition model

The most impacted industries:

Telecom industry: Unbundle contracts, discounts, subscriber

Recognise revenue to depict the transfer of goods or services

Steps to apply the core principle:

Deliver CU 100 When delivered

Contract Unbundling Allocating revenue

Time value of Variable Treatment of

Retrospective application with

• Early adoption permitted

Steps to apply the core principle:

• Apply on a contract-by-contract basis

• Portfolio approach may be allowed if impact not expected to be materially

The model does not apply to The model does provide

• Lease contracts (PSAK 73) • Identifying a contract

(3) Can identify

Question: How do we account for a contract which includes multiple

Apply separation and initial

Question: When should one or more contracts be combined as one single

Example: Contract submits one bid for construction of a motorway and a

Question: Some contracts may be modified during the period of the

Let’s look at an example…

Promises Delivers Promises Delivers

Reporting dates (RD) 1 2 3

Cumulative Cumulative Cumulative

* (120 x $100 + 30 x $95) / ^ (60 x $100 + 30 x $95) /

Does the modification add deliverables and increase contract

Would remaining deliverables qualify as

Will need to be assessed on facts and circumstances, but modifications for

Identify all promised goods and services in the contract

After proposed Or together with

Are there Yes Can customer Is the good or

Account for the

Goods/services are separable from

Current practice: Unbundle the licence from the add-on services

New practice: The licence and professional services may be

Choose one answer and then write in the box provided

1. Lisensi software and pembaharuan software merupakan satu kewajiban kontrak.

Manufacturing/Software sales/Consumer business

Consider the effects of:

• Variable consideration (e.g. estimate value at contract inception)

Reassess and update estimated transaction price at each reporting date

• Probability-weighted (expected values) or most likely amount

• Constraint to be applied to limit revenue recognition to the

Example (p. 109)…………Requirement to discount trade receivables

Although a financing component can only be quantified by considering individual performance

Therefore, in such circumstances, the entity would:

Time value of money (advance payment)

• Contract to sell Product A, with upfront

Goods and services contributed by customers

Consideration payable to customer

Allocate revenue between elements based on standalone selling

Standalone Observable price at which an entity would sell a

If not directly observable, standalone

 Residual approach allowed in certain (limited) circumstances

An entity shall allocate the transaction price to each performance

Allocation of transaction price to multiple performance obligations

Allocating discount to separate performance obligations (1/2)

• An entity enters into a contract with a

Allocating discount to separate performance obligations (2/2)