Revenue concentration on a few mandates: major-customer disclosure, disaggregation by mandate type, and going concern considerations

Financing support companies often depend on a handful of large mandates that are tendered, renewed or terminated by financiers; users need to know how concentrated revenue is, which types of mandate drive it and whether the loss of a key mandate threatens the business, yet entities sometimes omit major-customer information, present one undifferentiated revenue line, or ignore an expiring mandate in the going concern assessment and the carrying amount of related contract cost assets.

Is the entity within the scope of IFRS 8 (its debt or equity instruments are traded in a public market or it is filing to issue them), or does it disclose segment information voluntarily? Does revenue from any single external customer, treating entities under common government control as one customer where they are economically integrated, reach 10% or more of total revenue? How is revenue best disaggregated to show how economic factors affect it: by mandate type (primary servicing, special servicing, asset management, real estate services, advisory), by financier type, by fee basis? When do key mandates expire, what is the renewal or re-tender process, and what would happen to cash flows and covenants if they were lost?

1. Determine whether IFRS 8 applies; if it does, identify operating segments and reportable segments from the information reviewed by the chief operating decision maker.
2. Identify customers that individually account for 10% or more of revenue and disclose that fact, the total revenue from each and the segment reporting it; the identity of the customer need not be disclosed.
3. Use judgement on government-related entities: treat entities known to be under common control of a government as a single customer only where they are economically integrated, and apply the same reasoning consistently.
4. Regardless of IFRS 8 scope, disaggregate revenue under IFRS 15 into categories that depict how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors.
5. Assess going concern for at least twelve months from the reporting date, including scenarios where a key mandate is not renewed, and disclose material uncertainties or significant judgements.
6. Reassess the amortisation period and recoverability of contract fulfilment cost assets linked to mandates whose renewal is no longer expected.

Segment and major-customer disclosures use the amounts reported to the chief operating decision maker, reconciled to IFRS totals. Revenue disaggregation uses IFRS 15 amounts. Where non-renewal of a mandate becomes likely, the carrying amount of related contract cost assets is limited to the remaining consideration expected under the current term less the costs still to be incurred to provide the services, with any excess recognised as an impairment loss.

Disclose: (1) revenue from each major customer at or above the 10% threshold and the segment reporting it; (2) disaggregated revenue by mandate type and other relevant categories, reconciled to segment revenue where segments are reported; (3) remaining performance obligations and expected timing where required; (4) credit risk concentration on major counterparties; (5) going concern assessment outcomes, including any material uncertainty or the significant judgements made when concluding none exists; (6) capital management and dependence on key mandates where relevant to users.

• Omitting major-customer disclosure because the customer is a government entity or because the entity believes naming it is required
• aggregating all mandate types into a single revenue line
• ignoring the expiry of a mandate that represents a large share of revenue in the going concern assessment
• continuing to amortise contract cost assets over an expected renewal period after renewal has become unlikely
• applying IFRS 8 inconsistently by treating related government entities as separate customers in one year and one customer in another.