VALUE IFRS Plc Illustrative IFRS 15 Disclosures December 2015

VALUE IFRS Plc Illustrative IFRS 15 disclosures December 2015

This publication illustrates the types of disclosures that would be required if a fictitious company, VALUE IFRS Plc, had decided to adopt IFRS 15 Revenue from Contracts with Customers for its reporting period ending 31 December 2015. Supporting commentary is also provided. The publication complements our VALUE IFRS Plc publication which is available from www.pwc.com/ifrs.

The publication is for illustrative purposes only and should be used in conjunction with the relevant financial reporting standards and any other reporting pronouncements and legislation applicable in specific jurisdictions.

Global Accounting Consulting Services PricewaterhouseCoopers LLP

This content is for general information purposes only, and should not be used as a substitute for consultation with professional advisors.

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IFRS 15 Revenue from contracts with customers

IFRS 15 was first issued in May 2014 and amended in September 2015 to defer the effective date to 1 January 2018. Further amendments have been proposed in ED/2015/6 Clarifications to IFRS 15, however, the standard can still be applied early where permitted by the entity’s local jurisdiction. This document illustrates the types of disclosures that would be required if our fictional company, VALUE IFRS Plc, decided to first apply IFRS 15 for its reporting period ending 31 December 2015. Other circumstances might require additional disclosures that are not applicable to VALUE IFRS Plc. These are explained in the commentary at the end of this document. The disclosures in this document must be read in the context of the assumptions set out below. Different facts and circumstances could result in different measurements and classifications. Footnote references point to additional commentary at the end of this document. Assumptions made In compiling these illustrative disclosures, we have made the following assumptions: • VALUE IFRS Plc has applied IFRS 15 for the first time in the 2015 financial report (initial application date: 1 January 2015) and has chosen a full retrospective application of IFRS 15 in accordance with IFRS 15.C3(a) without using the practical expedients for completed contracts in IFRS 15.C5(a) and (b). • The adoption of IFRS 15 required changes in the group’s accounting policies and affected the recognition, measurement and presentation of certain amounts recognised in the statement of profit or loss and the balance sheet. See note 26 for explanations. • The group does not incur material costs to obtain contracts with customers such as sales commissions. • Disclosures required under other standards such as IFRS 7 that could be necessary (for example, for receivables arising from contracts with customers) are not illustrated. • The effect of the adoption of IFRS 15 on the line items in the balance sheet has been illustrated but not all of the disclosures that are required following a change in accounting policy have been provided. For an illustration of the disclosures that are required for changes in accounting policies, please refer to Appendix C of our Value IFRS Plc 2015 publication which shows a change in accounting for bearer plants (Biological assets). • Tentative changes proposed to IFRS 15 by ED/2015/6 have not been considered. • A change in the fact pattern such that the furniture retail business has been operating since 1 January 2014 rather than 1 January 2015 as per our annual publication; this allowed us to demonstrate a change in accounting for the customer loyalty programme.

IAS1(10)(b),(10A) Consolidated statement of profit or loss (extract) IAS1(51)(c),(e) 2014 IAS1(113) 2015 Restated * Notes CU’000 CU’000 C ontinuing operations

IAS1(82)(a) Revenue 3 204,890 148,680

IAS1(10)(a),(54) Consolidated balance sheet IAS1(51)(c),(e) 31 Dec 2014 1 Jan 2014 IAS1(113) 31 Dec 2015 Restated * Restated * Notes CU’000 CU’000 CU’000 IAS1(60),(66) ASSETS Current assets IAS1(54)(h) Trade and other receivables IFRS7(8)(c) 7(a) 17,388 9,587 6,346 Contract assets 3(b) 1,859 3,117 1,897

IAS1(60),(69) Current liabilities IAS1(54)(n) Contract liabilities 3(b) 4,327 3,560 2,734 * See note 26 for details about changes in accounting policies

IFRS 15

3 Revenue from contracts with customers 1,9 IFRS15(113) The group has recognised the following amounts relating to revenue in the statement of profit or loss: 2014 2015 Restated * Notes CU’000 CU’000

IFRS15(113)(a) Revenue from contracts with customers (a) 197,650 141,440 Revenue from other sources: Rental and sub-lease rental income 8(b) 7,240 7,240 Total revenue 204,890 148,680

* See note 26 for details about changes in accounting policies

(a) Disaggregation of revenue from contracts with customers 2,3 IFRS15(114) The group derives revenue from the transfer of goods and services over time and at a point in time in the following major product lines and geographical regions:

Furniture – Furniture- Electronic manufacture retail IT Consulting equipment All other Oneland China Oneland US Europe Oneland segments Total 2015 CU’000 CU’000 CU’000 CU’000 CU’000 CU’000 CU’000 CU’000 IFRS15(115) Segment revenue 55,100 35,100 31,600 33,300 16,900 13,850 16,600 202,450 IFRS8(23)(b) Inter-segment revenue (1,200) (700) (900) (800) (300) (500) (400) (4,800) IFRS8(23)(a),(28)(a) Revenue from external customers 53,900 34,400 30,700 32,500 16,600 13,350 16,200 197,650 Timing of revenue recognition IFRS15(B87)-(B89) At a point in time 53,900 34,400 30,700 1,000 600 13,350 16,200 150,150 Over time - - - 31,500 16,000 - - 47,500 53,900 34,400 30,700 32,500 16,600 13,350 16,200 197,650

Furniture- Electronic Furniture – manufacture retail IT Consulting equipment Oneland All other Oneland China Restated US Europe Oneland segments Total 2014 CU’000 CU’000 CU’000 CU’000 CU’000 CU’000 CU’000 CU’000 IFRS15(115) Segment revenue 60,350 22,560 14,300 22,600 14,790 - 10,400 145,000 Inter-segment revenue (1,150) (800) (300) (600) (610) - (100) (3,560) Revenue from external customers 59,200 21,760 14,000 22,000 14,180 - 10,300 141,440

IFRS15(B87)-(B89) Timing of revenue recognition At a point in time 59,200 21,760 14,000 800 500 - 10,300 106,560 Over time - - - 21,200 13,680 - - 34,880 59,200 21,760 14,000 22,000 14,180 - 10,300 141,440

IFRS 15

(b) Contract assets and liabilities IFRS15(116)(a) The group has recognised the following revenue-related contract assets and liabilities 31 Dec 31 Dec 1 Jan 2015 2014* 2014 * Notes CU’000 CU’000 CU’000

IAS1(77) Contract assets relating to IT consulting contracts (b)(i),(c(iv) 1,547 2,597 1,897 Asset recognised for costs incurred to fulfil contracts (b)(iv) 312 520 - Total contract assets 1,859 3,117 1,897

IAS1(77) Contract liability – expected volume discounts (b)(i),(c)(i) 350 125 100 IAS1(77) Contract liability – expected refunds to customers (c)(i),(ii) 145 110 179 IAS1(77) Contract liabilities – customer loyalty programme (c)(iii) 2,402 2,336 2,250 IAS1(77) Contract liabilities – IT consulting contracts (b)(iii),(c)(iv) 1,430 989 205 Total contract liabilities 4,327 3,560 2,734

* Reclassified and remeasured amounts – see note 26 for explanations (i) Significant changes in contract assets and liabilities IFRS15(118),(113)(b) Contract assets have decreased as the group has provided fewer services ahead of the agreed payment schedules for fixed-price contracts. There was also an impairment write-down of CU77,000 recognised in relation to the asset for costs to fulfil contracts, see (iv) for further information. Contract liabilities for expected volume discounts and IT consulting contracts have increased by CU473,000 following the acquisition of VALUE IFRS Electronics Group, see note 14.

(ii) Revenue recognised in relation to contract liabilities The following table shows how much of the revenue recognised in the current reporting period relates to carried-forward contract liabilities and how much relates to performance obligations that were satisfied in a prior year. 31 Dec 2014 31 Dec 2015 Restated CU’000 CU’000 IFRS15(116)(b) Revenue recognised that was included in the contract liability balance at the beginning of the period IT consulting contracts 230 178 Customer loyalty programme 190 272 * IFRS15(116)(c) Revenue recognised from performance obligations satisfied in previous periods Consideration from furniture wholesale contract, not previously recognised due to the constraint, see c(i) below. 150 - * See note 26 for details about changes in accounting policies

(iii) Unsatisfied long-term consulting contracts The following table shows unsatisfied performance obligations resulting from fixed-price long-term IT consulting contracts. 31 Dec 2015 31 Dec 2014 * CU’000 CU’000 IFRS15(120) Aggregate amount of the transaction price allocated to long-term IT consulting contracts that are partially or fully unsatisfied as at 31 December 8,881 - *

IFRS15(C5)(c),(C6) * As permitted under the transitional provisions in IFRS 15, the transaction price allocated to (partially) unsatisfied performance obligations as of 31 December 2014 is not disclosed. IFRS15(120)(b),(122) Management expects that 60% of the transaction price allocated to the unsatisfied contracts as of 31 December 2015 will be recognised as revenue during the next reporting period (CU 5,328,000). The remaining 40% (CU 3,553,000) will be recognised in the 2017 financial year. The amount disclosed above does not include variable consideration which is constrained.

IFRS 15

(b) Contract assets and liabilities (continued) IFRS15(121),(122) All other IT consulting contracts are for periods of one year or less or are billed based on time incurred. As permitted under IFRS 15, the transaction price allocated to these unsatisfied contracts is not disclosed. (iv) Assets recognised from costs to fulfil a contract In addition to the contract balances disclosed above, the group has also recognised an asset in relation to costs to fulfil a long-term IT contract. This is presented within contract assets in the balance sheet. 31 Dec 31 Dec 2014 * 2015 Restated CU’000 CU’000 IFRS15(128) Asset recognised from costs incurred to fulfil a contract at 31 December 312 520 Amortisation and impairment loss recognised as cost of providing services during the period 208 131

* See note 26 for details about changes in accounting policies IFRS15(127) In adopting IFRS 15, the group recognised an asset in relation to costs incurred in developing an IT platform that is used to fulfil an IT consulting fixed-price contract. These costs had been expensed as incurred in 2014, see note 26(iii) for further explanations. The asset is amortised on a straight-line basis over the term of the specific contract it relates to, consistent with the pattern of recognition of the associated revenue. Due to an increase in expected costs by 30% in the financial year 2015, management does not expect the capitalised costs to be completely recovered. An impairment loss of CU77,000 has therefore been recognised for the excess of the capitalised cost over the expected remaining consideration less any directly related costs not yet recognised as expense.

IFRS15(119) (c) Accounting policies and significant judgements (i) Sale of goods - wholesale IFRS15(119)(a),(c) The group manufactures and sells a range of furniture and electronic equipment in the wholesale IFRS15(123)(a),(125) market. Sales are recognised when control of the products has transferred, being when the products are delivered to the wholesaler, the wholesaler has full discretion over the channel and price to sell the products, and there is no unfulfilled obligation that could affect the wholesaler’s acceptance of the products. Delivery occurs when the products have been shipped to the specific location, the risks of obsolescence and loss have been transferred to the wholesaler, and either the wholesaler has accepted the products in accordance with the sales contract, the acceptance provisions have lapsed, or the group has objective evidence that all criteria for acceptance have been satisfied. IFRS15(119)(b),(d) The furniture is often sold with volume discounts based on aggregate sales over a 12 months period. (123)(b),(126) Revenue from these sales is recognised based on the price specified in the contract, net of the estimated volume discounts. Accumulated experience is used to estimate and provide for the discounts, using the expected value method, and revenue is only recognised to the extent that it is highly probable that a significant reversal will not occur. A contract liability is recognised for expected volume discounts payable to customers in relation to sales made until the end of the reporting period. No element of financing is deemed present as the sales are made with a credit term of 30 days, which is consistent with market practice. The group’s obligation to provide a refund for faulty products under the standard warranty terms is recognised as a provision, see note 8(h) for details. IFRS15(117) A receivable is recognised when the goods are delivered as this is the point in time that the consideration is unconditional because only the passage of time is required before the payment is due.

IFRS 15

IFRS15(119) (c) Accounting policies and significant judgements (continued)

IFRS15(123) Critical judgements in recognising revenue The group has recognised revenue amounting to CU2,950,000 for sale of furniture to a wholesale customer in December 2015. The buyer has the right to rescind the sale if there is 5% dissatisfaction with the quality of the first 100 pieces of furniture sold. This specific concession was made because this is a new product line specifically designed for this customer. However, consistent with other contracts, the group does not have a right to payment until the furniture has been delivered to the customer. Based on the quality assurance system implemented, the group is confident that the quality of the product is such that the dissatisfaction rate will be well below 5 %. Management have determined that it is highly probable that there will be no rescission of the contract and a significant reversal in the amount of revenue recognised will not occur. It is therefore appropriate to recognise revenue on this transaction during 2015 as control of the product is transferred to the customer. The profit recognised for this sale was CU1,625,000. The group would suffer an estimated pre-tax loss of CU1,760,000 in its 2016 financial statements if the sale is cancelled (CU1,625,000 for the reversal of 2015 profits and CU135,000 of costs connected with returning the stock to the warehouse). In 2014, the group did not recognise revenue of CU280,000 in relation to a wholesale contract with volume discounts for a new customer and new product line. The group did not have any experience with the customer’s purchase pattern and the product line. Management therefore determined that it was not highly probable that a portion of the revenue will not reverse. Of the CU280,000 of revenue not recognised in 2014, CU150,000 was recognised in the current financial year based on the actual volume sold for the contract period, see (b)(ii) above.

(ii) Sale of goods – retail IFRS15(119)(a),(c) The group operates a chain of retail stores selling household furniture. Revenue from the sale of (123),(125) goods is recognised when a group entity sells a product to the customer. IFRS15(117),(119)(b),(d) Payment of the transaction price is due immediately when the customer purchases the furniture. It is (123)(b),(126) the group’s policy to sell its products to the end customer with a right of return within 28 days. Therefore, a contract liability (refund liability) and a right to the returned goods (included in other current assets) are recognised for the products expected to be returned. Accumulated experience is used to estimate such returns at the time of sale at a portfolio level (expected value method). Because the number of products returned has been steady for years, it is highly probable that a significant reversal in the cumulative revenue recognised will not occur. The validity of this assumption and the estimated amount of returns are reassessed at each reporting date.

(iii) Sale of goods – customer loyalty programme IFRS15(119)(a),(c) The group operates a loyalty programme where retail customers accumulate points for purchases (123),(125) made which entitle them to discount on future purchases. Revenue from the award points is recognised when the points are redeemed or when they expire 12 months after the initial sale. IFRS15(123) (126)(c) Critical judgements in allocating the transaction price IFRS15(119)(b),(d) The points provide a material right to customers that they would not receive without entering into a (123)(b),(126) contract. Therefore, the promise to provide points to the customer is a separate performance obligation. The transaction price is allocated to the product and the points on a relative stand-alone selling price basis. Management estimates the stand-alone selling price per point on the basis of the discount granted when the points are redeemed and on the basis of the likelihood of redemption, based on past experience. The stand-alone selling price of the product sold is estimated on the basis of the retail price. Discounts are not considered as they are only given in rare circumstances. IFRS15(117) A contract liability is recognised until the points are redeemed or expire.

IFRS 15

IFRS15(119) (c) Accounting policies and significant judgements (continued) (iv) IT Consulting services IFRS15(119)(a),(c) The IT consulting division provides business IT management, design, implementation and support (124),(125) services. Revenue from providing services is recognised in the accounting period in which the

services are rendered. For fixed-price contracts, revenue is recognised based on the actual service

provided to the end of the reporting period as a proportion of the total services to be provided. This is determined based on the actual labour hours spend relative to the total expected labour hours. Some contracts include multiple deliverables, such as the installation of hardware and software. In most cases, the installation is simple, does not include an integration service and could be performed by another party. It is therefore accounted for as a separate performance obligation. In this case, the IFRS15(22),(73),(79) transaction price will be allocated to each performance obligation based on the stand-alone selling prices. Where these are not directly observable, they are estimated based on expect cost plus margin. . If contracts include the installation of hardware, revenue for the hardware is recognised at a point in time when the hardware is delivered, the legal title has passed and the customer has accepted the hardware. IFRS15(119)(b),(d) Estimates of revenues, costs or extent of progress toward completion are revised if circumstances (123)(b),(126) change. Any resulting increases or decreases in estimated revenues or costs are reflected in profit or loss in the period in which the circumstances that give rise to the revision become known by management. IFRS15(117) In case of fixed-price contracts, the customer pays the fixed amount based on a payment schedule. If

the services rendered by VALUE IFRS Plc exceed the payment, a contract asset is recognised. If the payments exceed the services rendered, a contract liability is recognised.

AASB15(117).(B16) If the contract includes an hourly fee, revenue is recognised in the amount to which VALUE IFRS Plc has a right to invoice. Customers are invoiced on a monthly basis and consideration is payable when invoiced. IFRS15(123) (126)(c) Critical judgements in allocating the transaction price Some fixed-price IT support contracts include an allowance for one free of charge hardware replacement per contract period up a specified value. Because these contracts include two performance obligations, the transaction price must be allocated to the performance obligations on a relative stand-alone selling price basis. Management estimates the stand-alone selling price at contract inception based on observable prices of the type of hardware likely to be provided and the services rendered in similar circumstances to similar customers. If a discount is granted, it is allocated to both performance obligations based on their relative stand-alone selling prices.

(v) Land development and resale IFRS15(119)(a),(c) The group develops and sells residential properties. Revenue is recognised when control over the (123),(125) property has been transferred to the customer. The properties have generally no alternative use for the group due to contractual restrictions. However, an enforceable right to payment does not arise until legal title has passed to the customer. Therefore, revenue is recognised at a point in time when the legal title has passed to the customer. IFRS15(119)(b),(d) The revenue is measured at the transaction price agreed under the contract. In most cases, the (123)(b),(126).(129).(63) IFRS15(117) consideration is due when legal title has been transferred. While deferred payment terms may be agreed in rare circumstances, the deferral never exceeds twelve months. The transaction price is therefore not adjusted for the effects of a significant financing component.

(vi) Financing components IFRS15(129),(63) The group does not expect to have any contracts where the period between the transfer of the promised goods or services to the customer and payment by the customer exceeds one year. As a consequence, the group does not adjust any of the transaction prices for the time value of money.

IFRS 15

12 Financial risk management (extract)

(c) Credit risk (extract) (iv) Impaired trade receivables (extract) Amounts recognised in profit or loss During the year, the following gains/(losses) were recognised in profit or loss in relation to impaired receivables. 2015 2014 CU’000 CU’000 IFRS7(20)(e) Impairment losses - individually impaired receivables (200) (130) - movement in provision for impairment (580) (540)

IFRS7(20)(e) Reversal of previous impairment losses 35 125

IFRS15(113)(b) Of the above impairment losses, CU739,000 (2014 – CU647,000) relate to receivables arising from contracts with customers (see note 3).

IAS1(117) 25 Summary of significant accounting policies (extract)

(a) Basis of preparation (extract) IAS1(112)(a),(117) (iii) New and amended standards adopted by the company IAS8(28)(b),(d) The group has elected to apply IFRS 15 Revenue from Contracts with Customers as issued in May IFRS15(C3) 2014. In accordance with the transition provisions in IFRS 15 the new rules have been adopted retrospectively and comparatives for the 2014 financial year have been restated. See note 26 below for further details on the impact of the change in accounting policy.

IAS1(119) (e) Revenue recognition The accounting policies for the group’s main types of revenue are explained in note 3.

26 Changes in accounting policies 4-7,9 IAS8(28)(c) As indicated in note 25(a) above, the group has adopted IFRS 15 as issued in May 2014, which resulted in changes in accounting policies and adjustments to the amounts recognised in the financial statements. The main changes are explained below. (i) Accounting for refunds When the customer has a right to return the product within a given period, the group previously recognised a provision for returns which was measured on a net basis at the margin on the sale (CU100,000 at 31 December 2013 and CU72,000 at 31 December 2014). Revenue was adjusted for the expected value of the returns and cost of sales were adjusted for the value of the corresponding goods expected to be returned. Under IFRS 15, if the customer returns a product, the entity is obliged to refund the purchase price. Therefore, a gross contract liability (refund liability) for the expected refunds to customers is recognised as adjustment to revenue (CU179,000 at 1 January 2014 and CU110,000 at 31 December 2014). At the same time, VALUE IFRS Plc has a right to recover the product from the customer where the customer exercises his right of return and recognises an asset and a corresponding adjustment to cost of sales (CU79,000 at 1 January 2014 and CU38,000 at 31 December 2014). The asset is measured by reference to the former carrying amount of the product. The costs to recover the products are not material because the customer usually returns the product in a saleable condition at the store. To reflect this change in policy, the group reclassified CU100,000 from provisions to contract liabilities of CU179,000 and contract assets of CU79,000 at 1 January 2014 (CU72,000 from provisions to contract liabilities of CU110,000 and contract assets of CU38,000 as at 31 December 2014).

(ii) Accounting for customer loyalty programme In previous reporting periods, the consideration received from the sale of goods was allocated to the points and the goods sold using the residual method. Under this method, a part of the consideration equalling the fair value of the points was allocated to the points. The residual part of the consideration was allocated to the goods sold. Under IFRS 15, the total consideration must be allocated to the points and goods based on the relative stand-alone selling prices. Using this new method, the amounts allocated to the goods sold are, on average, higher than the amounts allocated under the residual value method. As a consequence, the contract liability recognised in relation to the customer loyalty programme on 1 January 2014 (CU2,250,000) was CU40,000 lower than the amount recognised as deferred revenue under the previous policy, with a corresponding adjustment in retained earnings. Revenue for 2014 increased by CU6,000 and the restated contract liability at 31 December 2014 was CU34,000 lower than the amount previously recognised as deferred revenue. Retained earnings increased by CU34,000 as a consequence. (iii) Accounting for costs to fulfil a contract In 2014, costs amounting to CU 520,000 related to data transfer for the set-up of an IT platform relating to a long term IT contract were expensed as they did not qualify for recognition as an asset under any of the other accounting standards. However, the costs relate directly to the contract, generate resources used in satisfying the contract and are expected to be recovered. They were therefore capitalised as costs to fulfil a contract following the adoption of IFRS 15 and included in contract assets in the balance sheet as at 31 December 2014. (iv) Presentation of contract assets and contract liabilities 8 Value IFRS Plc has also voluntarily changed the presentation of certain amounts in the balance sheet to reflect the terminology of IFRS 15: • Contract assets recognised in relation to IT consulting contracts were previously presented as part of trade and other receivables (CU 1,897,000 as at 1 January 2014 and CU 2,597,000 at 31 December 2014). • Contract liabilities in relation to expected volume discounts and refunds to customers were previously presented as current provisions (CU 200,000 as at 1 January 2014 and CU 197,000 at 31 December 2014). • Contract liabilities in relation to IT consulting contracts were previously included in trade and other payables (CU 205,000 as at 1 January 2014 and CU 989,000 at 31 December 2014). • Contract liabilities in relation to the customer loyalty programme were previously presented as deferred revenue, see (ii) above. In summary, the following adjustments were made to the amounts recognised in the balance sheet at the date of initial application (1 January 2014 ) and at the end of the comparative period (31 December 2014): IAS 18 carrying Reclassi- Remeasure- IFRS 15 carrying Retained amount fication ments amount earnings effect 31 Dec 2013 1 January 2014 1 January 2014 Notes CU’000 CU’000 CU’000 CU’000 CU’000 Trade and other receivables (iv) 8,243 (1,897) - 6,346 - Other current assets (i) - - 79 79 - Contract assets (iv) - 1,897 - 1,897 - Contract liabilities (i),(ii),(iv) - 2,655 79 2,734 - Deferred revenue (ii) 2,290 (2,250) (40) - 40 Trade and other payables (iv) 12,930 (205) - 12,725 Provisions (iv) 730 (200) - 530 -

31 December 31 December 31 Dec 2014 2014 2014 CU’000 CU’000 CU’000 CU’000 CU’000 Trade and other receivables (iv) 12,184 (2,597) - 9,587 - Other current assets (i) - - 38 38 - Contract assets (iii, iv) - 2,597 520 3,117 520 Contract liabilities (i),(ii),(iv) - 3,522 38 3,560 - Deferred revenue (ii),(iv) 2,370 (2,336) (34) - 34 Trade and other payables (iv) 12,477 (989) - 11,488 Provisions (iv) 1,240 (197) - 1,043 -

IFRS 15 Revenue from contracts with customers

Objectives of disclosures IFRS15(110) 1. Users of the financial statements should be given sufficient information to understand the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. To achieve this, entities must provide qualitative and quantitative information about their contracts with customers, significant judgement made in applying IFRS 15 and any assets recognised from the costs to obtain or fulfil a contract with customers. Disaggregation of revenue IFRS15(114), 2. Entities must disaggregate revenue from contracts with customers into categories that depict (B87)-(B89) how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors. It will depend on the specific circumstances of each entity as to how much

detail is disclosed. VALUE IFRS Plc has determined that a disaggregation of revenue using existing segments and the timing of the transfer of goods or services (at a point in time vs over

time) is adequate for its circumstances. However, this is a judgement and will not necessarily be appropriate for other entities.

3. Other categories that could be used as basis for disaggregation include:

(a) type of good or service (eg major product lines)

(b) geographical regions

(d) type of contract (eg fixed price vs time- and-materials contracts)

(e) contract duration (short-term vs long-term contracts, or

(f) sales channels (directly to customers vs wholesale)

4. When selecting categories for the disaggregation of revenue entities should also consider how their revenue is presented for other purposes, eg in earnings releases, annual reports or

investors presentation and what information is regularly reviewed by the chief operating decision makers. Where revenue is disaggregated on a basis other than reportable segments, AASB15(115) the entity must disclose sufficient information so users of their financial statements can understand the relationship between the disaggregated revenue and the revenue information that is disclosed for each reportable segment. Disclosure of comparative information and transition requirements IFRS15(C1) 5. Entities must apply the revenue standard in the first interim period within annual reporting periods beginning on or after 1 January 2018, following the decision by the IASB in July 2015 to defer the application date by one year. Earlier adoption is permitted under IFRS, but will ultimately depend on the rules in the local jurisdiction of each reporting entity. VALUE IFRS Plc has adopted the standard from 1 January 2015 (date of initial application). IFRS15(C3) 6. In the first year of applying IFRS 15, an entity has two options: (a) It can apply the standard retrospectively to each prior reporting period presented (full retrospective method, with restatement of comparatives and third balance sheet where opening balances are affected) or (b) It can apply the standard retrospectively by recognising the cumulative effect of initially applying the standard at the date of initial application in retained earnings (simplified transition method, no restatement of comparatives and third balance sheet required). IFRS15(C5) 7. An entity that elects to apply the standard using the full retrospective method can apply certain practical expedients: (a) For completed contracts, an entity need not restate contracts that begin and end within the same annual reporting period. (b) For completed contracts that have variable consideration, an entity can use hindsight and use the transaction price at the date the contract was completed. (c) For all reporting periods presented before the date of initial application (1 January 2015 for VALUE IFRS Plc ), an entity is not required to disclose the amount of transaction price allocated to the remaining performance obligations and an explanation of when the entity expect to recognise that amount as revenue. IFRS15(C8) 8. Where the entity has chosen the simplified transition method, it shall apply IFRS 15 retrospectively only to contracts that are not completed at the date of initial application (1 January 2015 for VALUE IFRS Plc).

IFRS 15 Revenue from contracts with customers

Presentation and description of contract assets and contract liabilities IFRS15(BC320),(BC321) 9. VALUE IFRS Plc has decided to reclassify contract assets and contract liabilities and present them as a separate line item in the balance sheet. However, contract assets, contract liabilities and receivables do not have to be referred to as such and do not need to be presented separately in the balance sheet, as long as the entity provides sufficient information so users of financial statements can distinguish them from other items. Disclosures not illustrated: not applicable to VALUE IFRS Plc 10. The following requirements of IFRS 15 are not illustrated in this Appendix: Initial application Issue not illustrated Relevant disclosures or reference IFRS15(127)-(129),(94) Costs incurred to obtain a contract For assets recognised, provide disclosures as per IFRS 15 paragraphs 127 and 128. Where no asset is recognised because the period of amortisation is one year or less, disclose that fact. IFRS15(119)(e) Information about warranties and related This information is provided in note 8(h) in obligations the 2015 edition of VALUE IFRS Plc. IFRS15(C6) Full retrospective method: practical Disclose which expedients have been used expedients used (see paragraph 7 above) and, to the extent reasonably possible, provide a qualitative assessment of the estimated effect of applying each expedient. VALUE IFRS Plc has only used the practical expedient of IFRS 15.C5 (c), see illustrative disclosure on page 5. IFRS15(C8) Simplified transition method Disclose the amount by which each financial statement line item is affected by the adoption of the new rules in the current period and explain the reasons for any significant changes.