IFRS 15 Revenue from Contracts with Customers

IFRS 15 requires the identification of all goods and services that meet specific criteria to be regarded as being ‘distinct’.  In practice, this can result in the identification of separate goods and service that were not previously accounted for separately and a requirement to allocate specific amounts of revenue to them using a prescribed methodology.

As well as requiring additional goods and services to be accounted for separately, IFRS 15 requires two or more goods or services to be combined and accounted for as one overall obligation if an entity sells what in reality is a single overall item. In this way, IFRS 15 cuts through the legal form of contractual arrangements and requires what is really being provided to the customer to be accounted for.

In many cases, we expect the timing of revenue recognition to be deferred in comparison with current practice. The effect will be particularly pronounced for start-up entities, or those entering new markets, where there is a lack of an established track record of delivering on projects.

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