1 January 2018 is shaping up to be a significant date for first-time application of new accounting standards. 1 January 2018 is the application date for the new financial instruments standard, IFRS 9 Financial Instruments (FRS 109), the date when Singapore incorporated companies listed on SGX must adopt full IFRS, and is also likely to be the application date for the new revenue standard, IFRS 15 Revenue from Contracts with Customers (FRS 115). At their April 2015 board meeting, the International Accounting Standards Board (IASB) tentatively decided to defer the effective date for IFRS 15 from annual reporting periods beginning on or after 1 January 2017, to annual reporting periods beginning on or after 1 January 2018. Early adoption will still be permitted. The tentative decision was a result of the US Financial Accounting Standards Board (FASB) deciding to delay the US equivalent for a year, and preparers requesting more time for implementation due to the complexity of the standard and the significant changes that would be required to systems and processes. The IASB has issued an Exposure Draft proposing the new effective date with comments due by 3 July 2015.
Will there be any changes to IFRS 15?
Readers should not view this tentative decision to defer the standard as an indication that either this standard will be withdrawn, or that the standard is going to be subject to major changes, or be rewritten. The proposed deferral is simply an acknowledgement of the complexity of the standard and the length of time that an organisation will need to properly implement the standard. Although the IASB and the FASB may be making technical changes to the wording, issuing more guidance, etc., the requirements of the standard will not change.
IFRS 15 is here to stay (although likely to be delayed for 12 months), and in many cases it is likely to change the pattern and/or amount of revenue recognised. We recommend that you start considering the implications of IFRS 15 on your revenue recognition policies, because you may require extensive changes to your accounting and other information systems, as well as to bank covenants, employee remuneration targets, etc. This is particularly important if your business generates revenue from contracts that span multiple reporting periods.
More on IFRS 15
For more information on IFRS 15, including a range of publications and webcasts, please refer to the IFRS 15 section on the BDO International website at BDO International | Revenue Recognition.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.