IFRS 15 recently became effective for financial periods beginning on or after 1 January 2018. IFRS 15 is only applicable to entities that have implemented International Financial Reporting Standards as their financial reporting framework. The new standard does not currently affect entities utilising the International Financial Reporting Standards for Small and Medium-Sized Entities as financial reporting framework.The change from the previous standards regulating the recognition of revenue was initiated as it was found that the previous main revenue recognition standards namely, IAS 18 Revenue and IAS 11 Construction Contracts, were difficult to understand and apply. Furthermore, IAS 18 provided limited guidance on important topics such as revenue recognition for multiple-element arrangements.
The IASB and FASB initiated a joint project to clarify the principles for recognising revenue and to develop a common revenue standard that would:
- Remove inconsistencies and weaknesses in existing revenue requirements;
- Provide a more robust framework for addressing revenue issues;
- Improve comparability of revenue recognition practices across entities, industries, jurisdictions and capital markets;
- Provide more useful information to users of financial statements through improved disclosure requirements; and
- Simplify the preparation of financial statements by reducing the number of requirements to which an entity must refer.
- Identifying the contract;
- Identifying performance obligations;
- Determination of the transaction price;
- Allocation of the transaction price to performance obligations; and
- Recognition of revenue when or as the entity satisfies a performance obligation.
We firmly believe that proper planning prevents poor performance. We thus encourage management considering a switch to International Financial Reporting Standards from International Financial Reporting Standards for Small and Medium-Sized Entities to investigate the effect that IFRS 15 will have on the revenue figure.
We will gladly assist in any IFRS 15 implementation queries you might have.
Tiana Kluyts Louis Meyer Jannie van Deventer
firstname.lastname@example.org email@example.com firstname.lastname@example.org
This article is a general information sheet and should not be used or relied upon as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice. Errors and omissions excepted (E&OE)
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