The New Standard Revenue From Contracts With Customers

A requires companies to recognize revenue by using a liability equity approach because a contract results in a company s promise to perform a service and the company reports that promise as a liability until the service is completed.

The new standard revenue from contracts with customers. Since costs are typically incurred prior to the delivery of a unit this new standard accelerates the recognition of revenue for contracts that had previously been accounted for under the. International financial reporting standard 15 ifrs 15 revenue from contracts with customers has significantly changed the philosophy of revenue recognition not only to provide a fairer representation of corporate revenues but also to inhibit the use of revenues for earnings management purposes. The new rules on revenue recognition became effective from 1 january 2018 and it replaces former revenue recognition standards ias 11 construction contracts ias 18 revenues and most of other revenue recognition guidance ifric 13 customer loyalty programmes ifric 15 agreements for the construction of real estates ifric 18 transfers of assets from customers and sic 31 revenue barter transactions involving advertising services. Insurance contracts within the scope of ifrs 4 insurance contracts.

To hkfrs 15 revenue from contracts with customers. The new standard is designed to deal with customer contracts and evolving business models including contracts that bundle goods and services contingent pricing arrangements goods or services that are delivered over time licensing agreements and other complex arrangements. Ifric 13 customer loyalty programmes ifric 15 agreements for the construction of real estate ifric 18 transfers of assets from customers and sic 31 revenue barter transactions involving advertising services. Why do we need a new standard.

However previous revenue requirements. Ifrs 15 will replace the previous revenue standards ias 18 revenue and ias 11 construction contracts and the related interpretations on revenue recognition. Information about revenue is used to assess a company s financial performance and position and to compare that company with other companies. The new revenue standard aasb 15 revenue from contracts with customers applies to every industry and every business from 1 january 2018.

This guidance establishes a five step. The new standard revenue from contracts with customers topic 606 was issued on may 28 2014 and became effective for public companies on december 15 2017. The revenue recognition standard revenue from contracts with customers states a specific approach should be used by companies to recognize revenue. Financial instruments and other contractual rights or obligations within the scope of ifrs 9 financial instruments ifrs 10 consolidated financial statements ifrs 11 joint arrangements ias 27 separate financial statements and ias 28 investments in associates and joint ventures.