IFRS 15 early adoption, App C, paras C3, C4 transition exemption provisions taken

Rakuten, Inc. – Annual report – 31 December 2015

Industry: financial, technology

[Impact of Adoption of New Accounting Standards]

The Group Companies adopted the following accounting standard from the current fiscal year ended December 31, 2015.

IFRS  

Description

 

IFRS 15

 

Revenue from contracts with customers

(Issued in May 2014)

 

Newly issued standard on accounting and disclosure for revenue recognition

 

 

The Group Companies adopted IFRS 15 in accordance with the transition elections available, and therefore retrospectively recognized the cumulative effect of initially applying the standard as an adjustment to the opening balance of retained earnings of the current fiscal year.

In accordance with IFRS 15, from the current fiscal year, excluding interest and dividend income and other such income from financial instruments recognized in accordance with IFRS 9 and insurance revenue recognized in accordance with IFRS 4, revenues are recognized upon transfer of promised goods or services to customers in amounts that reflect the consideration to which Group Companies expect to be entitled in exchange for those goods or services based on the following five step approach:

Step 1: Identify the contracts with customers

Step 2: Identify the performance obligations in the contract

Step 3: Determine the transaction price

Step 4: Allocate the transaction price to the performance obligations in the contract

Step 5: Recognize revenue when (or as) the entity satisfies a performance obligation

We recognize the incremental costs of obtaining contracts with customers and the costs incurred in fulfilling contracts with customers that are directly associated with the contract as an asset if those costs are expected to be recoverable. The incremental costs of obtaining contracts are those costs that the Group Companies incur to obtain a contract with a customer that they would not have incurred if the contract had not been obtained.

As a result, at the beginning of the current fiscal year, other assets (assets arising from contract costs), deferred tax liabilities, retained earnings and non-controlling interests increased by ¥20,679 million, ¥7,305 million, ¥13,244 million and ¥103 million, respectively, as compared to the amounts that would have been recorded had the previous accounting standard been applied. In addition, other assets (long-term prepaid expenses) decreased by ¥27 million.

Moreover, operating expenses decreased by ¥7,894 million, due to capitalization and amortization of assets arising from contract costs, for the fiscal year ended December 31, 2015 as compared to the amounts that would have been recorded had the previous accounting standard been applied.

The impact of the adoption on other accounts in the Consolidated Statement of income for the current fiscal year, including revenue is immaterial.

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