IASB issues new Standard on revenue recognition
June 04, 2014
The Standard outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers. It supersedes current revenue recognition guidance including IAS 18 Revenue, IAS 11 Construction Contracts and related Interpretations.
The core principle is that an entity recognises revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.
The Standard introduces far more prescriptive guidance than was included in IAS 18, IAS 11 and the related Interpretations and the majority of entities are likely to be affected by this, at least to some extent. Furthermore, the Standard may result in substantial changes to the timing of revenue recognition for some entities.
Entities will need to consider the extent to which changes, in some cases substantial, may be required to processes, IT systems and internal controls as a result both of the new model and of the increased disclosure requirements.
The Standard is effective for reporting periods beginning on or after 1 January 2017 with early application permitted. Entities can choose to apply the Standard retrospectively or to use a modified transition approach.