Revenue – ifrs 15 handbook

13.5 
First-time adoption
IFRS 1.D34–D35 
A first-time adopter of IFRS may adopt the revenue standard when it adopts IFRS. 
It is not required to restate contracts that were completed
1
before the date of 
transition to IFRS – i.e. the earliest period presented.
A first-time adopter may apply the practical expedients available to an entity 
already applying IFRS that elects the retrospective method. In doing so, it 
interprets references to the ‘date of initial application’ as the beginning of its first 
IFRS reporting period. If a first-time adopter decides to apply any of the practical 
expedients, then it discloses:
– the expedients that have been used; and 
– a qualitative assessment of the estimated effect of applying each of those 
expedients, to the extent reasonably possible.

Timeline for a first-time adopter
IFRS 15
31 December 2018
1 January 2017
1
Previous GAAP
(only contracts open
under previous
GAAP at
1 January 2016
are restated)
IFRS 15
(except to the
extent of any
practical expedients
elected)
31 December 2017
Comparative year
Current year
Date of equity
adjustment
Date of initial
application
Note
1. Date of transition to IFRS.
1. For a first-time adopter, a completed contract is a contract for which the entity has transferred 
all of the goods or services identified under previous GAAP.

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13 Effective date and transition | 343
13.5 First-time adoption
| 
Example 14 – First-time adopter of IFRS
Carmaker M applies IFRS for the first time in its annual financial statements 
for the year ended 31 December 2018. M presents one year of comparative 
information in its financial statements and therefore its date of transition to IFRS 
is 1 January 2017.
M sells cars to dealers with a promise to provide one free maintenance service 
to the end purchaser of a car. 
Under previous GAAP, M treats the free servicing component of the 
arrangement as a sales incentive, recognising a provision with a corresponding 
expense when the vehicle is sold to the dealer. In addition, it recognises 
revenue at the invoice price when the car is delivered to the dealer.
Under the standard, M determines that the arrangement consists of 
two performance obligations – the sale of the car and a right to one free 
maintenance service. This treatment results in a different pattern of revenue 
recognition from previous GAAP, because a portion of the transaction price 
is allocated to the free service and recognised as the performance obligation 
is satisfied.
If M elects to apply the standard only to contracts that are not completed under 
previous GAAP at the date of transition to IFRS, then it applies the standard to 
its contracts for the sales of cars as follows.
– M makes no opening adjustments at the date of transition for contracts 
relating to cars that have already been delivered to the dealer, because a first-
time adopter is not required to analyse contracts that are completed under 
previous GAAP before the date of transition. This is because the cars have 
all been delivered and the free services are not considered to be part of the 
revenue transaction under previous GAAP.
– If M elects to apply practical expedient 1, then it does not restate the 
comparative period because the car sales were recognised as point-in-time 
sales under previous GAAP.
– If M does not elect to apply practical expedient 1, then it restates sales in the 
comparative period for the effect of allocating the transaction price between 
the car and the free maintenance service.
– The approach elected for 2017 comparatives does not impact revenue for 
2018. M applies the new standard to all cars sold on or after 1 January 2018.
An IFRS entity could achieve the outcome described above for a first-time 
adopter in two ways: 
– electing a practical expedient and therefore not restating contracts that are 
started and completed in the same annual reporting period before the date of 
initial application; or
– electing to apply the cumulative effect method.

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© 2019 KPMG IFRG Limited, a UK company, limited by guarantee. All rights reserved.
344 | Revenue – IFRS 15 handbook
Guidance referenced
Standards are referred to in this handbook by their topic – e.g. references to ‘the 
financial instruments standard’ are to IFRS 9.