AASB issues new revenue recognition standard

The Australian Accounting Standards Board (AASB) has published AASB 15: Revenue from Contracts with Customers. Except for some limited exceptions, AASB 15 will provide a single source of accounting requirements for all contracts with customers. The new Standard will impact the reported results of clients that:

  • provide customers with bundled products and/or services;

  • provide customers with significant warranties and/or rebates;

  • experience significant variability in revenue collectability from contract to contract;

  • have contracts for which the amount of consideration can vary; and/or

  • renegotiate the scope and/or consideration with customers.

The types of industries that are most likely to be impacted by the adoption of AASB 15 include construction,manufacturing, telecommunications, software development and licensing, and real estate. The economic implications of AASB 15 for clients will vary, depending upon their particular circumstances, but clients with bank covenants and/or compensation arrangements tied to revenues or profits or public reporting obligations are likely to be affected by the new Standard.

AASB 15 will become effective for annual reporting periods beginning on or after 1 January 2017. For many clients, the new Standard will necessitate changes in some information systems and processes to capture previously uncollected information. Accordingly, preparation will be the key to a successful adoption of the new Standard.

To download a comprehensive analysis of this update from Moore Stephens Australia please click here.