and developments related to the various accounting frameworks. Today, we present bringing clarity

to an IFRS world - IFRS 15 Revenue from Contracts with Customers. I am Jon Kligman, your host

for today’s webcast, and I am joined by Maryse Vendette, Cindy Veinot, and Joyce Lam.

I will tell you more about our speakers a little later on. Before we get to our agenda,

a few housekeeping items. In the lower right hand corner of your screen, you will see the

webcast links including a link to download and print today’s slides and links for webcast

assistance, Deloitte updates, upcoming sessions, and archive sessions. If you have a pop-up

blocker on your computer, you will need to disengage it in order to download the slides

and participate in our polling questions. If you know of colleagues who could not attend

today’s live event, they can simply register at any time the same way you did and they

will be able to view the archived webcast within 48 hours. So, invite your colleagues

to take advantage of this feature. Although you are on a listen-only mode, you can ask

our presenters content related questions at any time by entering your question in the

box at the bottom of the screen and clicking on submit. We will do our best to respond

to your questions and comments during the presentation. We also have interactive polling

questions that will appear on your screen throughout the webcast. We invite your participation

by simply answering these questions. A summary of the results will be provided on the screen

shortly afterwards. Okay, let us get to our agenda. First you

will hear from Maryse Vendette, who will provide us with an introduction to the new standard

and to speak to a scope. As well Maryse will begin walking us through the steps of new

revenue model. After Maryse, Joyce Lam will continue to walk us through the remaining

steps of the new revenue model, will then be joined by Cindy Veinot, who provide us

with some guidance and some of the other matters related to the standard and to speak to some

of the expected impacts, challenges and issues. We will conclude by highlighting some resources

for future reference and with a brief question and answer session. You can read the bios

of our presenters and access the agenda and technical support in the navigation area of

your screen. We have a lot of material for a 90-minute webcast, so we will need to keep

the discussion at a fairly high level. I would like to remind our viewers that our comments

on this webcast represent our own personal views and do not constitute official interpretive

accounting guidance from Deloitte. Before taking any action on any of these issues,

it is always a good idea to check with a qualified advisor.

Okay, to kick things off, let us start with our first polling question. We are going to

ask everyone online to participate in this webcast by answering the polling question.

Can we have the question please, there we go.

Okay, so the question is, have you started assessing the impact of IFRS 15 - Revenue

from Contracts with Customers and the answers are:

• Project plan is in place • Aware of the new Standard and will start

assessment in the near term • No plan to commence work at this time

• Not applicable After you select your answer, which is the

best in your circumstances, please remember to hit submit answer to register your response.

While we are waiting for the responses, I would like to remind you that today’s webcast

maybe counted towards your continuing professional education. If you stay with us for the whole

webcast, you can credit yourself with one-and-a-half hours towards your yearly total. This applies

to those in public practice and those working in industry. We do not issue certificates

for the webcast, but your email registration confirmation conform part of your documentation

in support of your attendance. Okay, let us see if we have the responses

please. There we go. Okay almost 45% are going to start their assessment in the near term

and 11.7% have a project plan in place, that is a very healthy percentage of folks online

who are either already started or near starting. As you will hear on this webcast, the new

standard can have significant impact on both the accounting and on the information requirements.

Okay, I would now like to welcome our first two speakers, Maryse Vendette and Joyce Lam.

Maryse Vendette is a Partner at our National Office and is a co-deputy leader of the Canadian

IFRS Centre of Excellence. She is the National subject matter authority in the field of revenue

recognition as well as a member of Deloitte’s Global Expert Advisory panel on revenue. Joyce

Lam is a Senior Manager in the Advisory Services Group of Deloitte and specializes in providing

accounting advisory services to clients in all industries. Joyce has extensive experience

in assisting clients on accounting matters in the areas of revenue recognition, business

combinations and share-based payments under IFRS and US GAAP.

Over to you Maryse.

Thanks Jon. Good afternoon, I guess good morning for some of you across the country. Let us

start with some background information on IFRS 15. We received what I would refer to

exciting news in the accounting world on May 28, 2014, when IFRS 15 was finally issued.

It was issued concurrently with Accounting Standards Update ASU 2014-09 it is US GAAP

equivalent. The issuance of IFRS 15 completes a long-standing project that began back in

2002 between the IASB and the FASB to develop a high quality global accounting standard.

For all intents and purposes, IFRS 15 and US GAAP are converged. There are minor differences

between the two standards and those have been identified in an appendix to the standard

in the basis for conclusions. This standard addresses how to account for all contracts

of customers using one model of accounting that will apply to all types of transactions

in all industries in capital markets. Currently, we have diverse pieces of guidance under IFRS

over some 200 pieces of literature dealing with specific transactions or industries under

US GAAP. This new standard will replace all or most of that by one model. We will have

to wait and see how it is interpreted how it is interpreted and implemented, but the

objective is that the new standard will increase comparability, reduce diversity in accounting

for similar transactions across industries. We wanted to highlight that the IASB and FASB

have created a joint Transition Resource Group. So, the members of the resource group have

been announced and they include financial statement preparers, auditors, users, obviously

the boards and members of the regulator community, people in various industries and geographic

locations. The purpose of the Transition Resource Group is not to issue guidance, but is really

to solicit, analyze and discuss issues arising from implementation, inform the boards about

the issues that are being dealt with so that the boards can take decisions about actions

that need to be taken, provide a form for stakeholders to learn about the new standard.

The boards expect that the Transition Resource Group will meet twice in 2014 and four times

in 2015 and the first meeting is scheduled July 18. All the meetings will be public and

anybody can submit a potential implementation issue for discussion at the Transition Resource

Group meetings. The boards will evaluate those submissions and prioritize the issues for

discussion. I realize that the text maybe a bit small on the slide, but we have here,

to the left of the screen, the requirements currently found in IFRS on revenue in the

main standards as well as in the interpretations and this contrasts with the new requirements

to the right of the screen. A couple of points to bring to your attention here.

  The first one is as you see IFRS 15 has a

broad scope. It has guidance on a number of aspects that are now included in various pieces

of literature under IFRS. IFRS currently has guidance on construction contracts in IAS

11, sales of goods, sales of services under IAS 18, construction of real-estate under

IFRIC 15 and IFRS 15 will replace all of that and IFRS 15 will not distinguish explicitly

or does not distinguish explicitly between sales of goods or serves, but rather it provides

guidance on whether revenue should be recognized overtime similar to a service or long-term

construction contracts or revenue should be recognized at a particular point in time similar

to a sale of good and we will discuss that in more detail later on. IFRIC 13 is superseded

and replaced by broader guidance on options granted to customers to acquire additional

goods or services or at a discount and provides broad guidance on breakage, customer unexercised

rights. IFRIC 18 and 631 dealing with Transfers of Assets from Customer and Advertising Barter

Transactions are superseded and IFRS 15 includes guidance on how to deal with noncash consideration

and nonmonetary exchanges generally and finally where are previously IAS 18 contains specific

guidance on accounting for interest and dividends. These are now scoped out of IFRS 15 and dealt

with by IAS 39 and IFRS 9. Consequential amendments were made to those two standards to incorporate

guidance that was previously included in IAS 18 and its appendices.

Moving onto effective date and transition options. IFRS 15 is effective for annual reporting

periods beginning on or after January 1, 2017 including interim periods. For an entity with

a calendar year-end, it would apply IFRS 15 in the first interim period and on March 31,

2017, early application is permitted under IFRS 15, but it is not permitted under US

GAAP. The boards have provided a bit of relieve by way of transition methods. An entity can

choose between two transition options. So it can elect to either apply the standard

fully retrospectively or apply it retrospectively but taking into account three practical expedients

to retrospective application, which are identified obviously in standard and if any of the practical

expedients are used, they have to be applied consistently to all reporting periods. They

have to be disclosed to the extent that it is possible an entity will have to include

a qualitative assessment of the likely effect of applying the practical expedients or an

entity can also choose to apply the standard using a modified approach, so that means that

it would apply the revenue standard retrospectively, but only to contracts that are not completed

as of the date of initial application of the standard so that is again January 1, 2017

and it would recognize a cumulative catch-up adjustment to retained earnings as of that

date without restating comparative figures. The use of the modified approach may reduce

the cost and complexity of adopting the standard because there is no need to make an assessment

of contract completed prior to the year of adoption, but it also has its drawbacks and

that some revenue will not be presented in profit and loss, but instead would be included

in the beginning retained earnings as a cumulative catch-up adjustment and obviously some parallel

accounting will be required in 2017 to be able to disclose the information that is required

by the standard.

The following slide provides a tabular example that is intended to illustrate visually the

two transition methods. Under the full retrospective approach, it is clear from here that for new

contracts and existing contracts you have to apply IFRS 15 in the current year, but

also in the prior that is presented and also to produce our opening balance sheet that

would be required under IAS 1 when you apply a new standard. Under the modified approach,

the standard would be applied to any new contracts entered into on or after the initial application

date of January 1, 2017 for a calendar year-end example.

  An entity would also need to evaluate those

contracts that are not complete at the date of initial application using the new revenue

model and determine the cumulative catch-up adjustment to be recorded to beginning retained

earnings and finally any contracts completed prior to the year of adoption would not need

to be re-evaluated or accounted for under the modified approach, that means that revenue

from these contracts recognized in prior periods presented would not be restated under this

approach. If an entity decides to employ this modified transition approach, it is required

to provide some additional disclosures, of course, to show to users how they transition

from the legacy guidance to IFRS 15. The first of which is to present the financial statement

line items and the related amounts that are affected in the current year in 2017 because

of the application of the standard and second a description of significant changes between

the new standard and the legacy guidance.

As mentioned previously, IFRS 15 has a broad and all-encompassing scope. It applies to

contracts with customers except those that are within the scope of other IFRSs. It is

important to understand how IFRS 15 defines a contract and defines a customer. Under IFRS

15, a contract is defined as an agreement between two or more parties that creates enforceable

rights and obligations and a customer is defined as a party that has contracted with an entity

to obtain goods or services that are an output of the entity’s ordinary activities in exchange

for consideration. IFRS 15 includes in its scope transfers of assets that are not an

output of the entity’s ordinary activities. For instance, transfers of sales of property,

plant and equipment, real-estate or intangible assets would be within the scope of certain

aspects of the IFRS 15 model. Specifically, the criteria for determining the existence

of a contract, measurement and control principles would apply to these transfers or sales of

non-financial assets to determine when and for what amount the asset should be derecognized.

With respect to contracts with collaborators or partners, during the re-deliberations,

the boards acknowledge that parties to collaborative arrangements, which are common in certain

industries such as in the pharmaceutical industry or biotechnology industry could represent

customers and that therefore certain collaborative arrangements would be within the scope of

IFRS 15. To determine whether a transaction or a collaboration arrangement is in or out

of scope of IFRS 15, an entity would consider the structure and purpose of the arrangement

to determine whether the transaction is for the sale of goods and services as part of

the entity’s normal business activities and whether the counterparty represents a

customer and if that is the case then the collaborative arrangement would fall within

its scope. The revenue model does not apply to contracts within the scope of other IFRSs,

so IAS 17 contracts those within the scope of IFRS 4 for insurance contracts, those within

the scope of financial instruments and other contractual rights or obligations, which would

be in the scope of IFRS 9, IFRS 10, IFRS 11 for instance and finally nonmonetary exchanges

between entities in the same line of business whose purpose is to facilitate self to customers.

On this one, I believe this requirement is a bit different from the scope exception currently