Happy birthday AASB 15
The new revenue standard, AASB 15 Revenue from Contracts with Customers celebrates its third birthday this month, being issued by the International Accounting Standards Board in May 2014.
Because application was delayed by one year from 1 January 2017 to 1 January 2018, many preparers have put off their transition assignments because they think there is plenty of time, or because they mistakenly believe that the new standard will not impact them in a material way.
The new revenue standard isn’t just about accounting – The whole business needs to be on board
Application of the new revenue standard is not just about accounting. The biggest challenge in application is in respect of the changes to systems and processes that will be required, and in many cases, revenue recognised will not equate to the invoiced/billed amounts.
Wayne Basford, BDO IFRS Leader Asia Pacific, and Judith Leung, BDO Senior Manager, recently authored an article for the Chartered Accountants Australia and New Zealand on why the new revenue standard, AASB 15 is about more than just accounting.
The article highlights how systems changes may be required at every stage of the new five step revenue recognition model. In a large number of cases AASB 15 will change the pattern or amount of revenue recognition. For these types of transactions, revenue will no longer be able to be recorded in the accounting systems based on invoiced amounts. This means that significant process and systems changes will be required to be able to properly account for revenue under AASB 15.
The article explains how AASB 15 revenue recognition requirements may change current practice, and why systems and process changes would be required, including:
- Step 1: Combining contracts
- Step 1: Modifying contracts
- Step 2: Identifying different performance obligations
- Step 3: Variable consideration and constraining estimates
- Step3: Variable consideration and financing components
- Step 5: Recognising revenue when each performance obligation is satisfied.
Please read the article for further information.
For assistance in applying AASB 15, please contact one of our IFRS Advisory consultants.