Revenue – ifrs 15 handbook

Example 9 – Cumulative effect method
in this chapter, Software Company Y decides to apply the 
cumulative effect method, with the following consequences.
– Y does not adjust the comparative periods, but records an adjustment to 
opening equity at the date of initial application (1 January 2018) for the 
additional revenue related to 2016 and 2017 that would have been recognised 
if the new standard had applied to those periods.
– Y also considers the effects of the revenue adjustments on related cost 
balances and adjusts them.
– Y discloses the amount by which each financial statement line item is affected 
in the current period as a result of applying the new standard.
The revenue amounts presented in Y’s financial statements are as follows.
Contract
2016
2017
2018
Revenue
100
1
200
1
25
Adjustment to opening equity
-
-
75
2
Notes
1. Amounts are not restated and represent the amounts recognised under previous 
requirements for those periods.
2. Calculated as 300 for the software licence plus 75 for the telephone support (for 2016 and 
2017) minus 300 recognised under previous requirements (being 400 × 18 / 24).
Example 10 – Cumulative effective method: Sale with right of 
return
Drinks Company W enters into a contract to sell 100 items of Product P to 
Customer C. C has a right to return the products within one month of delivery if 
they are not satisfactory. The products are delivered on 15 December 2017 and 
C returns 20 of them on 15 January 2018. 
W has elected to transition to the new standard using the cumulative effect 
method and has elected to apply the completed contracts practical expedient. 
W’s date of initial application is 1 January 2018. 
This is a completed contract at 31 December 2017 because W has transferred 
all of the goods identified under the previous requirements before that date. 
Because the contract is a completed contract, W accounts for the transaction in 
accordance with its existing accounting policy for a sale with a right of return.

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13 Effective date and transition | 339
13.3 Cumulative effect method
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