As of January 1, 2018, the IFRS 15 standard has been implemented. This is a new standard for revenue recognition. This new standard was introduced because the old standards were not unambiguous enough. But what exactly does this mean and what do you all need to take into account? You will read that in this article. We also refer you to a website where you can find more information about IFRS 15. So read on quickly.
The basis and conditions of IFRS 15
To begin with, we will explain what the basic principles of IFRS 15 are. By means of IFRS 15, accounting for revenue becomes more transparent and consistent. This is, of course, a good thing. The introduction of IFRS 15 will mainly apply to the construction, manufacturing and software sectors. The point is that you, as a company, must be able to correctly account for what you have earned from certain goods or services. IFRS 15 describes a number of steps that are necessary to follow:
- Identify contract with customer
- Identify performance obligations of the contract
- Determine transaction price
- Allocate the transaction price to performance obligations
- Revenue recognition when the performance obligation is met
Thus, it is important to follow the above points because this is how a company can account for the profit of products or goods. Compared to the older system, there is less room in IFRS 15 to deviate from the intended principle. For example, rules have been drawn up for adjusting a contract. In practice, it turned out that contracts are often amended. By means of the new standard, this can no longer be done so easily. Among other things, this ensures a more unambiguous processing of revenues. A disadvantage of IFRS 15 is that it is a fairly complex standard. It is therefore questionable whether everyone involved has sufficient knowledge to apply this standard properly. To find out more about IFRS 15, you can consult Annual Reporting, for example. This is a knowledge base for IFRS. On this website, the necessary steps are explained more clearly and extensively. You can also read more about why this standard was introduced and why it is so important. In the paragraph below you can find the link to this knowledge base.
Check the website of Annual Reporting for more information about IFRS 15
You have now read why IFRS 15 was introduced as a new standard and what this standard actually entails. There are both advantages and disadvantages to this new standard. One advantage is that the justification of revenue becomes more transparent. A disadvantage is that it is a fairly complex standard, which not everyone understands easily. Do you still find it unclear or would you like more information about IFRS 15? Then go to the website of Annual Reporting via www.annualreporting.info and find all the information and important points regarding the new revenue recognition standard. Also, on this website you can find more information about other standards that are being used for company reports and valuations. Start now, get the information and benefit.