Are your clients ready for the new revenue standard – AASB 15 Revenue from Contracts with Customers? TIME IS UP.
Time has run out to understand and assess the implications of the new accounting standard, AASB 15 Revenue from Contracts with Customers. The impact of the application of AASB 15 must not be underestimated. The International Accounting Standards Board have fundamentally changed how entities recognise revenue.
For periods commencing on or after 1 January 2018, the new revenue standard, AASB 15 will replace the various existing accounting standards and interpretations applicable to revenue recognition with a single standard based on a principles-based model.
The new standard provides a five step process to ensure 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 to in exchange for the goods or services.
Whilst understanding the application of AASB 15 on your clients various income streams will be complex and is fundamental, it is important to note that the impact of applying AASB15 goes far beyond revenue recognition and there are a number of wider implications that must be considered.
If the application of AASB 15 requires a revised revenue recognition model, revenue based measures, such as performance based bonuses, bank covenants and earn out clauses, will be substantially impacted.
The application of AASB 15 may have tax impacts in both the short
term and long term and effective tax planning should be given
consideration when structuring future or restructuring current
There are also practical issues to consider, including whether your accounting system can accommodate the change, which employees will need training and what transitional approach would provide the most effective results, to name a few.
Throughout this time expectations of the users of the financial
information must be managed as significant changes in revenue may be
interpreted as a result of alternative circumstances.
Whilst some entities may not need to change their revenue recognition model and therefore may not be impacted by the aforementioned points and will see no financial impact of the implementation of this standard, entities preparing general purpose financial statements will at a minimum have to comply with increased disclosure requirements.
If your organisation requires assistance please reach out to Wali
Aziz, the audit partner of Walker Wayland NSW, for advice on
Contact Wali Aziz:
Phone:+ 61 2 9951 5400
Article Author: Hayley Saunders