related to the various accounting frameworks.

This presentation is bringing clarity to an IFRS world, Clarifications to IFRS 15, Revenue

from Contracts with Customers, Understanding the Final Standard.

I’m Jon Kligman, your host for this webcast and I’m joined by others from our Advisory

and National Accounting Groups.

A couple of housekeeping items before I tell you about our agenda.

If you would like a copy of the slides, they are available for download on the same webpage

as where you accessed this webcast.

You can direct colleagues to the webcast link by referring them to the Deloitte Canada Center

for Financial Reporting, which is accessible from the IAS Plus website at iasplus.com.

Simply select Canada English from the dropdown menu at the top right of the webpage.

Ok, let’s get to our agenda.

First, you’ll hear from Nura Taef who will set the stage by providing us with a brief

summary of the new revenue recognition standard and some of the topics discussed by the Joint

Transition Resource Group.

Then, Nura and Maryse Vendette will speak to guidance and examples set out in the recently

issued IFRS 15 clarifications.

Maryse will also provide a comparison of IFRS in US GAAP amendments to the respective standards

and to provide some insight on implementation considerations for IFRS 15.

Cindy Veinot will then walk us through the case study.

Our comments on this webcast represent our own personal views and don’t constitute

official interpretation of accounting guidance from Deloitte.

Before taking any action on any of these issues, it’s always a good idea to check with a

qualified advisor.

No professional development certificates will be issued for attending this webcast.

We encourage you to check with your provisional institute or ordre regarding professional

development credits.

I now like to welcome our first two speakers, Nura Taef and Maryse Vendette.

Nura is a senior manager in our national office and part of our IFRS Center of Excellence.

Nura’s main area of focus is on determination of final technical positions on interpretations

and application matters for revenue recognition issues both, for other IFRS centers and client

service teams in Canada.

Maryse Vendette is a partner with our national office and is the co-leader of the Canadian

IFRS Center of Excellence.

She is a national subject matter authority in the field of revenue recognition as well

as the member of Deloitte’s Global Expert Advisory Panel on Revenue.

Thanks Jon.

Before we get started in to more detailed discussions regarding the amendments to IFRS

15, I just want to start off by providing a brief recap on some of the more significant

events related to the standard that have led up to this point.

So, just over 2 years ago on May 2014, the IASB issued IFRS 15, which was the result

of the joint project with the US National Standard Setters, the FASB.

Concurred with the release of IFRS 15, the FASB issued Topic 606 US GAAP equivalent and

in issuing this new standard, the board’s objective was really to address stakeholder

concerns around inconsistencies and weaknesses in existing revenue standards by providing

a comprehensive and robust revenue recognition framework.

Subsequently, the IASB and FASB jointly established the transition resource group for revenue

recognition referred to as the TRG.

With the intention to support implementation of this new standard and provide a form to

solicit, analyze and discuss stakeholder concerns.

Since the issuance of the standard, this joint TRG met 6 times.

As a result of these ongoing discussions, the boards are made aware of a number of requirements

in the new standard where different interpretations were emerging as to how these requirements

should be implemented and practiced.

In light of these ongoing discussions, the boards felt it appropriate to defer the effective

date of the standard by one year.

So, from an IFRS 15 perspective, this meant moving from mandatory effective date of annual

reporting periods beginning on or after Jan 1, 2017, to annual reporting periods beginning

on or after Jan 1, 2018.

This ongoing discussion also highlighted for the boards the need to clarify certain requirements

of the standard.

So, in April 2016, the IASB issued targeted amendments to the standard and introduced

some transitional relief as well.

With the issuance of these amendments, the IASB is of the view that the stakeholders

must focus on their implementation efforts as IFRS 15 will not be subject to further

changes.

In light of the IASB’s comments, we wanted to get sense of where our listeners are at

in terms of their implementation process.

When you registered for this webcast, you were asked to complete a number of survey

questions, one of which was where you are at in the process of adopting IFRS 15.

As you can see on the screen, the majority of our listeners were either in very early

stages of assessment or had not yet begun any sort of preliminary assessment.

Although 2018 may seem far away at this point, given the potential breadth of impacts of

the standard, I think it is important to empathize that we really need to shift focus to the

standard and its potential applications.

IFRS 15 includes some specific scoping considerations that may present some differences with the

existing revenue recognition guidance, which makes it important to be mindful of the details

of this guidance.

The scope of the standard is intended to cover all contract customers with the exception

of those contracts that are leasing contracts, insurance contracts, financial instruments

or other contractual rights or obligations and non-monetary transactions between entities

in the same line of business to facilitate sales to customers or potential customers.

In addition, the guidance and the standard as it relates to the transfer control will

need to be applied not just contracts with customers within the scope of IFRS 15, but

also to some transfers or sales of non-financial assets.

So, collaborators or partners or those that fall partially within the scope of IFRS 15

and partially within the scope of other standards will require additional consideration and

assessment.

I also wanted to emphasize that IFRS 15 has a broadened scope, as it not only addresses

revenue recognition but also addresses the requirement for contract costs, being incremental

cost of obtaining a contract and cost of fulfilling a contract.

As I mentioned earlier, the effective date of standard is now annual reporting periods

beginning on or after Jan 1, 2018, including interim periods.

Earlier application is permitted under both IFRS and US GAAP, however, as noted on the

slide, US GAAP prepares can only adopt as of the original effective date of standard

which should be annual reporting periods beginning after December 15, 2016.

I won’t spend too much time on this next slide and will refer listeners to our July

2014 webcast available at our Center for Financial Reporting, where we provide a more detailed

analysis of the new revenue model, if you require further context on the 5-step model

and some of the basic requirements of the standard.

What I will highlight is that the IFRS 15 model for revenue recognition is based on

5 steps, starting with identifying the contract with the customer, identifying the performance

obligation, determining the transaction price, allocating the transaction price to the performance

obligations and finally, recognizing revenue whenever the entity satisfies the performance

obligation.

The application of this 5-step model results in recognition of revenue in a manner to depict

that transfer of promised goods or services in an amount that reflects the consideration

that an entity expects to be a entitled to in exchange for these goods or services, which

is the core principle of IFRS 15.

In addition to the 5-step model, the standard includes application guidance to clarify how

the principles in IFRS 15 should be applied, including how those principles should be applied

to the features found in a number of typical contracts with customers.

Some examples are sales with the right of return, licenses, warranties and customer

options for additional goods and services amongst others.

As mentioned earlier, subsequent to the issuance of the new standard, the IASB and FASB jointly

established the TRG.

Although non-authoritative and the TRG does not issue guidance, TRG members will share

their views on issues that have been raised by stakeholders as they work through implementation.

The TRG may make recommendations to the board to further discuss and consider specific implementation

issues which have in fact occurred as demonstrated by the amendments most recently issued.

Up to the end of 2015, the TRG discussed in their joined meetings an approximate 48 papers,

the majority of which the TRG members determine to be sufficiently addressed by the existing

requirements and guidance in the standard.

Although not a comprehensive list, some of these topics are listed on the slide to provide

you with some context on the array of issues being discussed.

I do want to highlight an important announcement that was made earlier this year by the IASB.

When the board completed their decision making process, being their decisions around the

clarifications, the board also confirmed that they do not plan to further schedule any meetings

of the IFRS constituent to the TRG.

Nonetheless, the IASB will continue to use other forums such as their website, as a mechanism

for the stakeholders to submit any further potential implementation issues to ensure

that they continue to support the consistent and faithful implementation of IFRS 15.

Although not scheduled to meet, the IFRS constituent of the TRG are not disbanded and if necessary,

they can be re-called to discuss an issue.

This past April, another TRG meeting was held; however, for the first time, this meeting

was only amongst the US GAAP constituents of the TRG.

Some IASB board members and the IASB staff did participate as observers in this meeting

and may continue to do so for future meetings.

It is the IASB’s intention to continue to collaborate with the FASB and therefore monitor

these discussions that the FASB may have with the US GAAP constituents of TRG.

The papers discussed and the minutes of the TRG meetings are all publicly available and

we encourage you to be informed and educated on these discussions.

The topics of collectability, performance obligations, gross versus net, identifying

promised goods or services, licenses, non-cash consideration received from a customer, shipping

services and specific transition considerations are topics whereby the TRG concluded that

additional discussion was required on the part of the boards, as different views merged

from the TRG discussions on the implementation of these requirements.

Now, getting into the clarifications, throughout 2015 the boards discussed the topics from

the previous slide that were brought to their attention by the TRG and concluded that certain

amendments would be required which resulted in the issuance of clarifications to IFRS

15 issued in April 2016 by the IASB and a number of accounting standard updates issued

by the FASB throughout 2016.

The IASB has reiterated the objective of these amendments is not to change the underlying

principles of IFRS 15 but rather to clarify the board’s intentions when they initially

developed the requirements of IFRS 15.

In the decision to issue these clarifications, the IASB applied a high hurdle in considering

what amendments were required in order to minimize changes where possible and reduce

disruption to the implementation process.

The board acknowledged that anytime new standards are issued, a number of initial questions

arise, these questions generally get resolved over time as they are worked through.

However, the board wanted to balance this belief with the need to be responsive to the

issues and concerns raised that are challenging entities in their implementation efforts.

As such, the amendments are really