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By introducing a single revenue recognition model, IFRS 15 replaces a situation where the revenue model depends on whether a contract is covered by IAS 11 Construction Contracts or IAS 18 Revenue and on the type of transaction or event (i.e. whether the entity is performing under a construction contract, selling a good, rendering a service or has income from interest, royalties and dividends).
According to IFRS 15, an entity shall generally recognise revenue when (or as) the entity transfers a promised good or service (i.e. an asset) to a customer. An asset is transferred when (or as) the customer obtains control of that asset.
Some of the other significant changes compared to IAS 11 and IAS 18 address problems in relation to:
IFRS 15, as published by the IASB, is effective for annual periods beginning on or after 1 January 2017, although earlier application is permitted.
EFRAG has issued an Invitation to Comment relating to the endorsement of IFRS 15 for use in the EU and EEA. It is consulting both on its assessment of the Standard against the technical criteria for the endorsement in the EU and on its initial assessment of the costs and benefits that would arise from the implementation and application of the Standard in the EU. In relation to the latter issue, EFRAG specifically asks whether it will be possible to apply IFRS 15 by 1 January 2017.
EFRAG’s initial assessment is that IFRS 15 satisfies the technical criteria for EU endorsement and EFRAG therefore recommends its endorsement.
Comments are requested by 15 December 2014.