RULES FOR ACCOUNTING RECOGNITION OF CUSTOMER AGREEMENT REVENUE - NBC TG 47 (CPC 47 - IFRS 15)

Purpose and Basic Principle of the Standard

The purpose of this standard is to establish the principles that the entity should apply to present useful information to users of financial statements about the nature, value, timing and uncertainty of revenues and cash flows arising from the contract. with customer (reproduction of the text contained in the standard).
The basic principle of this standard is that the entity should recognize revenue to describe the transfer of promised goods or services to customers in the amount that reflects the consideration the entity expects have a right in exchange for those goods or services (reproduction of the text contained in the standard).
The entity must consider the terms of the contract and all relevant facts and circumstances when applying this standard. The entity shall apply this standard, including the use of practical expedients, in a manner consistent with contracts that have similar characteristics and in similar circumstances (reproduction of the text contained in the standard).
The standard specifies the accounting of an individual contract with the client. However, as a practical expedient, it provides that the entity may apply the provisions contained therein to a portfolio of contracts (or performance obligations (*)) with similar characteristics, provided that it can reasonably be expected that the effects on the financial statements, arising from the application of this standard to the portfolio, do not differ significantly from the application of its provisions to individual contracts (or performance obligations) within that portfolio. When accounting for the portfolio, the entity must use estimates and assumptions that reflect the size and composition of the aforementioned portfolio.
(The terms "performance obligation (s)" have been replaced throughout the standard by "obligation (s)" of performance ”, as per NBC Revision 01.)
(*) The term“ performance obligation ”in this standard refers to the obligation of the selling entity to perform its commitment to pass on control of the good or service to the purchasing entity. < br /> It is necessary to clarify that for the purpose of achieving what is contained in the standard when it mentions “Revenue from Contract with Client” (the emphasis is ours), the word contract is not specifically related to its formal existence through a written instrument establishing the rights and obligations demanded of the parties, as according to the standard itself, in its item 10, “contracts can be written, verbal or suggested by usual business practices. those of the entity ”(the full reading of this item in the standard is suggested).
Scope of the Standard
The entity must apply this standard to all contracts with customers, except the following (item 5 of the standard) :
(a) lease contracts within the scope of NBC TG 06 - Lease Operations;
(b) insurance contracts within the scope of NBC TG 11 - Insurance Contracts;
(c) financial instruments and other contractual rights or obligations within the scope of NBC TG 48 - Financial Instruments, NBC TG 36 - Consolidated Statements, NBC TG 19 - Joint Business, NBC TG 35 - Separate Statements and NBC TG 18 - Investment in Associated Company, Subsidiary and Joint Ventures; and
(d) non-monetary exchanges between entities in the same business line to facilitate sales to customers or potential customers. For example, this standard does not apply to contracts between two companies in the oil and gas sector that agree to exchange oil to meet the demand of their customers in different specified locations, in a timely manner.
The entity shall apply this standard to the contract (except contract listed in item 5) only if the contract counterparty is a customer. The customer is the party that has contracted with the entity to obtain goods or services that are a product of the entity's normal activities in exchange for consideration. The contract counterparty will not be considered a customer if, for example, the counterparty has contracted its participation in an activity or in a process in which the parties to the contract share the risks and benefits that result from the activity or process (such as example, the development of an asset in a collaboration agreement) and not to obtain the proceeds of the entity's normal activities (reproduction of the standard text).
Revenue recognition
The entity must account for the effects of a contract with a customer who is within the scope of this standard only when all (the emphasis is ours) the following criteria are met (reproduction of the standard text):
(a) when the contract parties approve the contract (for written, verbally or in accordance with other usual business practices) and are committed to fulfilling their respective obligations;
(b) when the entity can identify the rights of each party in relation to o the goods or services to be transferred;
(c) when the entity can identify the payment terms for the goods or services to be transferred;
(d) when the contract contains a commercial substance (ie , the risk, timing or amount of the entity's future cash flows are expected to change as a result of the contract); and
(e) when it is probable that the entity will receive the consideration to which it will be entitled in exchange for the goods or services that will be transferred to the customer. When assessing whether the possibility of receiving the consideration is likely, the entity should consider only the client's ability and intention to pay that consideration when due. The amount of the consideration to which the entity is entitled may be lower than the price stated in the contract if the consideration is variable, as the entity may offer the customer a price reduction (see item 52 of the standard).
cumulative compliance with the above criteria is mandatory for the entity to be able to recognize the effects of a contract with a client, including the respective revenue. Therefore, as long as not all of these criteria are met, the consideration that may be received by the entity should be recognized in accounting not as revenue but as a liability.
The standard provides for two exceptional situations in which even I have not attempted to be met the five items and / or criteria mentioned above and the entity will receive consideration from the customer, this will be recognized as revenue, as follows:
(a) The entity has no remaining obligations to transfer goods or services to the customer, and all, or practically all, of the consideration promised by the client was received by the entity and is not refundable; or
(b) The contract has been terminated and the consideration received from the customer is non-refundable.
The entity shall recognize revenue when (or to the extent that) it meets the performance obligation when transferring the good or service (i.e. an asset) promised to the customer. The asset is considered transferred when (or as) the customer obtains control (the emphasis is ours) on that asset.
Tax Treatment of Revenue
Through RBF Normative Instruction 1,771, of 20 / 12/2017, the IRS created an attachment (Annex IV) for IN RBF nº 1,753, of 10/30/2017, specifically contemplating CPC 47 regarding Revenue from Contract with Client.
Finally, we highlight that the provisions of the standard now addressed are of general scope, however, there are some activities that, given their characteristics, are more inserted in this context, for example:
 Civil Construction;
 Communications / Telephony (sale of devices with network services);
 Intellectual Property Licenses (roylties);
 Computing (development and sale of software);
 Industries in general that produce large equipment. < br /> (July / 2019) Roberto P. Neves