The main objectives of this project were as follows:
- To remove inconsistencies and weaknesses in existing revenue recognition standards by providing clear principles for revenue recognition in a robust framework
- To provide a single revenue recognition model which will improve comparability over a range of industries, companies and geographical boundaries
- To simplify the preparation of financial statements by reducing the number of requirements to which preparers must refer.
This project was jointly conducted with the US-based Financial Accounting Standards Board (FASB)
US GAAP consisted of broad revenue recognition concepts around which numerous industry- and transaction- specific requirements evolved to deal with individual types of contracts. IFRS contained fewer standards, but the two main standards could be difficult to apply to complex transactions.
The boards undertook this project to provide clear principles on when revenue should be recognised and how much revenue should be recognised.
The key principles on which the Standard is based – that revenue is recognised on transfer to the customer, measured at the transaction price – are consistent with much of current practice. The boards believe the Standard will improve financial reporting by:
- providing a more robust framework for addressing issues as they arise;
- increasing comparability across industries and capital markets;
- providing enhanced disclosures; and
- clarifying accounting for contract costs.
This project was completed in May 2014 with the publication of IFRS 15 Revenue from Contracts with Customers.