Abstract:

As a joint venture of the two most important standard setters – International Accounting Standards Board (IASB) and Financial Accounting Standards Board (FASB) – a new revenue standard was introduced in 2014. Becoming effective for annual periods on or after 1 January 2018, the International Financial Reporting Standard 15 Revenue from Contracts with Customers has replaced the previous International Reporting Standard 18. The most important change is that the new standard creates a single five-step model for revenue recognition from contracts with customers, which is, according to the goals of standard setters, aimed at promoting greater consistency and comparability across industries and capital markets. The core principle of the model is to recognize revenue when control of the goods or services transfers to the customer, as opposed to recognizing revenue when the risks and rewards transfer to the customer. Since these changes will not affect all revenue recognition transactions, but will primarily be limited to contracts with customers, all industries will not be affected to the same extent. Given the characteristics of different activities and the nature of dealing with customers, it is expected that the industries that will be the most influenced are: telecommunication, media and entertainment, retail and consumer products, automotive, software, real estate and construction, power and utilities, travel, hospitality and leisure sector, as well as aerospace and defense sector. The complexity of revenue allocation, transaction price calculation and various industry specific factors (such as considering the effect of warranties, loyalty programs, contract modifications, rebates, discounts, etc.) have resulted in delaying the effective date of the new revenue standard to allow the most effected industries a reasonable time to comply to the new requirements.