The International Accounting Standards Board and the U.S. Financial Accounting Standards Board today published a new joint standard on revenue recognition. This replaces most of the detailed guidance on revenue recognition that currently exists under U.S. GAAP and IFRS.
Brian O’Donovan, partner with KPMG’s International Standards Group based in London, commented: “Publishing a joint standard on revenue recognition is a major achievement for the standard setters. But for companies, the real work is just beginning.”
The new standard comes over five years after the standard setters published the first version of their joint revenue proposals. O’Donovan continued: “The long project timescales have caused many companies to postpone thinking about how they will be impacted. It’s natural that some have taken a ‘believe it when I see it’ approach to news that accounting requirements are about to change. But now it’s here, we have a new standard on one of the most important financial reporting metrics – revenue – and it will apply to almost all companies reporting under IFRS and U.S. GAAP.”
The new requirements will affect different companies in different ways. O’Donovan explained: “Companies that sell products and services in a bundle, or those engaged in major projects – for example, in the telecom, software, engineering, construction and real estate industries – could see significant changes to the timing of revenue recognition. For others, it will be more a case of ‘business as usual’. All companies need to assess the extent of the impact, so that they can address the wider business implications, including communications with investors and analysts.”
Some aspects of the new standard will affect all companies. O’Donovan continued: “The new disclosure requirements are extensive and might require changes to systems and processes to collect the necessary data – even if there is no change to the headline numbers in the financial statements.”
The new standard takes effect in January 2017, although IFRS preparers can choose to apply it earlier. Brian O’Donovan concluded: “While the effective date may seem a long way off, decisions need to be made soon – namely, when and how to transition to the new standard. An early decision will allow companies to develop an efficient implementation plan and inform their key stakeholders.”
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 IFRS 15 Revenue from Contracts with Customers and Accounting Standards Codification Topic 606.