WebinarIFRS 15 and 16:Disclosing the changeKPMG’s 2018Annual Report Market Watch–16 May 2019

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With you todayCapital Markets Accounting Advisory Services

André Trajano da SilvaManager

Ruben RogPartner

Rachel BrouwerSenior

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IFRS 15 was implemented

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Transition approachIFRS 15

Full retrospective

Cumulative effect

IFRS 15 IFRS 15 1 January 2017

1 January 2018

Transition option 2017 2018 Date of equity adjustment

IAS 11/18

36%

32%

32%Cumulative effect approach

Retrospective approach

Not disclosed

Note: (1) Cumulative effect method: entity also needs to disclose revenue amounts that would have been presented under IAS 11/18.

IFRS 15

IAS 11/18(1)

2018 disclosures on transition approach

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26%

14% 13% 13%

4% 3% 3% 3%

Timing of revenue recognition

Transaction price

Identification of PO

Presentation

Allocation of Transaction price

Cost to obtain/ fulfil a contract

Principle vs agent

Onerous contracts

13%

87%

Material

Not material

The impact of IFRS 15IFRS 15

4%

90%

6%

Material

Not material

Not disclosed

For insights on how to account for onerous contracts see our publication “How to account for onerous contracts when adopting IFRS 15”

Estimated Impact - 2017 Actual impact - 2018

Drivers of impact

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43%

35%30% 30%

26%22%

17%

4%

IFRS 15.C5(a) - Completed contractsIFRS 15.94 - Incremental costsIFRS 15.63 - Financing componentIFRS 15.121 - Unsatisfied POIFRS 15.C5(d) - Remaining POIFRS 15.C5(c) - Contract modificationsIFRS 15.C5(b) - Transaction priceIFRS 15.B16 - Right to invoice

Practical expedientsIFRS 15

You can find more information about practical expedients for transition options in our publication Revenue Transition Options

5%

33%

62%

Did not apply any

Made use of one or more

Did not disclose whether theywere applied

What do companies say about practical expedients?

Practical expedients applied

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DisclosuresIFRS 15

96%

4%

Disclosed Not disclosed

78%

51% 51%

19% 16% 13%6% 6%

Geographical region Type of good or servicesOperating/Reportable segment Timing of transfer of goods or services Business line Market or type of customerSales channels Other

Enable users to understand the nature, amount, timing and uncertainty of revenue and cash flows

Disaggregation of revenue - 2018 Categories disclosed

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Element of disclosure

Disclosures – Other topicsIFRS 15

Timing of satisfaction of PO

Contract balances

Allocation of transaction price

Remaining PO

65%

51%

39%

30%

You can find more information about the disclosure requirements of IFRS 15 in our publication IFRS 15 supplement – Guide to annual financial statements

2018 disclosures

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Things to considerIFRS 15

Application of IFRS 15 is a on-going process,

as commercial business models and contracts

are consistently changing

IFRS 15 is a complex and comprehensive

standard that remains a focus point for

regulators

There is room for improvement in the

quantity and quality of IFRS 15 disclosures

IFRS 16 is on the horizon…

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Transition approachIFRS 16

KPMG Publication - Leases Transition Options

Note: (1) The company will apply IAS 17 in preparing its financial statements for 2018. It will then apply IFRS 16 to prepare comparative financial information to be included in its 2019 financial statements.

Full Retrospective

Modifiedretrospective

IFRS 16(1)

IAS 17(1)

IAS 17

IFRS 16

IFRS 16 1 January 2019

1 January 2018

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8%

29%

63%

201710%

79%

11%

2018

Full Retrospective Modified Retrospective Not Disclosed

Transition approach – resultsIFRS 16

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Practical expedients and recognition exemptionsIFRS 16

YesYes

Yes Yes

No

No

0%

10%

20%

30%

40%

50%

60%

Grandfather existinglease assessment

Short-term leaseexpedient

Short-term leaseexemption

Low-value leaseexemption

16%

7%

77%

Not disclosed

No

Yes

Combine lease and non-lease components

Transition Ongoing

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Modified retrospective – additional optionsIFRS 16

Use of hindsight for

lease term7%

Exclude initial direct cost

9%

Reliance on onerous lease

provision11%

Single discount rate for lease

portfolios13%

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Quantification of the impactIFRS 16

8

34

18

2

Not disclosed Under 5%5-20% Over 20%

What is the percentage increase in total assets as at 1 January 2019?

Depreciation Interest

Cash rental payments

Impact on lessee profit or loss

Total lease expense will be front-loaded even when cash rentals are constant

Debt covenants? EBITDA?

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Reconciling IAS 17 to IFRS 16 Other quantitative disclosures

New disclosuresIFRS 16

Operating lease commitment (2018)

Discounted using an appropriate rate

Short-term leases exempted

Low-value leases exempted

Extension and termination options reasonably exercised

Variable payments on an index or rate

Residual value guarantees

-

-

+

-

+

For further details on the required disclosures, refer to our publication on IFRS 16 disclosures

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What’s next?IFRS 16

Q1 and half-year reporting

Risks and controls for lease

processes

Business as usualImpairments

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Publications and materials

Link to the publication Link to the publication

Link to our website

Link to the content

Thank youYour contactsRuben RogCapital Markets Accounting Advisory ServicesPartnerKPMG the NetherlandsTel: +31 20 656 8830Mob: +31 6 5126 7612rog.ruben@kpmg.nl

André TrajanoCapital Markets Accounting Advisory ServicesManagerKPMG the NetherlandsTel: +31 20 656 8647 Mob: +316 5368 7661trajanodasilva.andre@kpmg.nl

Rachel BrouwerCapital Markets Accounting Advisory ServicesSeniorKPMG the NetherlandsTel: +31 20 656 7503 Mob: +316 8304 6954brouwer.rachel@kpmg.nl

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