Revenue is a crucial number to users of financial statements in assessing an entity’s financial performance and position. However, revenue recognition requirements under IFRSs are different from those under US GAAP and both sets of requirements need improvement. US GAAP comprises broad revenue recognition concepts and numerous requirements for particular industries or transactions that can result in different accounting for economically similar transactions. Although IFRSs have fewer requirements on revenue recognition, the two main revenue recognition standards, IAS 18 Revenue and Construction Contracts, can be difficult to understand and apply. In addition, IAS 18 provides limited guidance on important topics such as revenue recognition for multiple-element arrangements.
Accordingly, the IASB and FASB initiated a joint project to clarify the principles for recognising revenue and to develop a common revenue standard for IFRSs and US GAAP that would:
- remove inconsistencies and weaknesses in existing revenue requirements
- provide a more robust framework for addressing revenue issues
- improve comparability of revenue recognition practices across entities, industries, jurisdictions and capital markets
- provide more useful information to users of financial statements through improved disclosure requirements
- simplify the preparation of financial statements by reducing the number of requirements to which an entity must refer.
Current status of the project
This project has been completed. IFRS 15 Revenue from Contracts with Customers was issued on 28 May 2014.
|June 2002||Added to the IASB's agenda|
|19 December 2008||Discussion Paper Preliminary Views on Revenue Recognition in Contracts with Customers published||Comment deadline 19 June 2009|
|24 June 2010||Exposure Draft ED/2010/6 Revenue from Contracts with Customers published||Comment deadline 22 October 2010|
|14 November 2011||Exposure Draft ED/2011/6 Revenue from Contracts with Customers published (re-exposure)||Comment deadline 13 March 2012|
|28 May 2014||IFRS 15 Revenue from Contracts with Customers issued||Effective for an entity's first annual IFRS financial statements for periods beginning on or after 1 January 2017|