Why is it an issue?
- The new standard replaces existing IFRS revenue recognition guidance
- May result in a substantial change in the amount and timing of revenue recognition
- Significantly more qualitative and quantitative disclosures are required.
- Revenue from bundled goods and services requires separation and may result in deferring or accelerating revenue
- The provision of incentives to purchase (e.g. free goods or services provided as part of a sale) may require separation
- Modifications to long term contracts are likely to take place over the contract term
- Explicit guidance on the treatment of licenses may change the timing of revenue recognition
- The guidance on contract costs is expected to result in the recognition of more assets.
What should you consider?
- Your method of adoption (full retrospective or modified retrospective)
- Stakeholders will need access to consistent historical financial records including quantification of the effect of IFRS 15 on the accounts
- Choosing the right system for the future – system implementation can take a number of years to get right, you may need an interim solution to meet the requirements of adoption
- Bear in mind other changes in IFRS – IFRS 9 (financial instruments) in 2018 and IFRS 16 (leases) in 2019.
Companies are at varying stages of readiness for IFRS 15 adoption. The time has come to translate theory into practice. Key questions to consider:
- Do you have a complete project plan?
- Have you secured the resources to deliver the plan?
- Could you provide stakeholders and the market with the numbers this year?