Save content
Have you found this content useful? Use the button above to save it to your profile.
iStock/merznatalia

Revenue recognition IFRS put back a year

by
27th Jul 2015
Save content
Have you found this content useful? Use the button above to save it to your profile.

Last week the International Accounting Standards Board (IASB) bowed to the inevitable and delayed the implementation of its revenue recognition standard for a year until 1 January 2018.

The move had been signalled back in April and follows a broadly similar resolution from the US Financial Accounting Standards Board (FASB) earlier this month.

Revenue recognition has been an accounting hotspot since before the 2008 global financial crisis, for example rearing its head earlier this year when Tesco was found to have manipulated the recognition of promotional discount payments in its annual accounts.

The response from international standard-setters was IFRS 15 ‘Revenue from Contracts with Customers’, which was jointly released in May 2014 with a planned effective date of 1 January 2015.

The draft standard was issued later than expected and as Thomson Reuters pointed out in an analysis late last year, the requirement companies to present two years’ comparatives in their next accounts did not leave them enough time to configure their accounting systems for January 2017.

A batch of further amendments has been put forward by a joint FASB-IASB transition group, and the year’s delay means that these can be applied by companies when they adopt IFRS 15 for the first time.

The IASB expects to issue a formal amendment to the standard in September setting out the new effective date and early adoption will be permitted, but not before the original effective date of 1 January 2017.

Just ahead of the IASB announcement, Grant Thornton issued the results of a survey showing that only 25% of businesses expected to be ready to implement the standard by January 2107. The US was not far behind the global average at 20% but the figures for German and Japanese companies fell to 8% and 9% respectively.

“Our survey backs up what we're hearing from our clients – that many companies are struggling to meet the original deadline,” said Grant Thornton global head of IFRS Andrew Watchman.

He added that because IFRS extended to areas beyond the accounting function such as compensation, contracting and broader policy-making, most entities would welcome more time to prepare. Industries most likely to be affected included retail, property where “off-plan” sales figures would need to be recalibrated, and technology and telecoms, where services and products are delivered in bundles over extensive contract periods.

For a more cynical take on the standard’s impact on technology, Point and Clique commented on GoingConcern.com: “With the specific performance obligation requirement, the entire consulting and social media industries are going to have to figure out what they're actually selling.” 

Replies (0)

Please login or register to join the discussion.

There are currently no replies, be the first to post a reply.