IASB issues amendments to IFRS 15
FINANCIAL REPORTING INSIGHTS |
The International Accounting Standards Board (IASB) recently issued amendments to International Financial Reporting Standard (IFRS) 15, Revenue from Contracts with Customers. The amendments result from discussions of the Transition Resource Group, which was set up jointly by the IASB and the Financial Accounting Standards Board (FASB) to assist companies with implementing the new revenue standards issued by the IASB and the FASB. The amendments clarify how to:
- Identify a performance obligation (the promise to transfer a good or a service to a customer) in a contract
- Determine whether a company is a principal (the provider of a good or service) or an agent (responsible for arranging for the good or service to be provided)
- Determine whether the revenue from granting a license should be recognized at a point in time or over time.
In addition to the clarifications, the amendments include two additional reliefs to reduce cost and complexity for a company when it first applies IFRS 15. The amendments have the same effective date as IFRS 15 – for annual reporting periods beginning on or after January 1, 2018.
As previously communicated, in March, the FASB issued Accounting Standards Update (ASU) 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net), to revise the principal vs. agent guidance originally included in ASU 2014-09, Revenue from Contracts with Customers (Topic 606). Our summary, Revenue recognition: FASB revises new principal vs. agent guidance, provides: (a) background information on ASU 2014-09 and the process in place to address issues that have arisen in practice with respect to its implementation and (b) an overview of the revised principal vs. agent guidance in Topic 606 of the FASB’s Accounting Standards Codification (ASC). For a complete list of all the pending and finalized revisions to ASC 606, refer to our summary, Revenue recognition: In motion.