Revenue recognition

Date recorded:

Transitional relief for first-time adopters of IFRSs

During the June 2011 joint Board meetings, the Boards tentatively decided to require retrospective application of the revenue recognition standard to ensure comparability across reporting periods. However, in considering constituent concerns over the burden of full retrospective application, the Boards tentatively decided to grant the following four transitional reliefs to full retrospective application:

  • An entity should not be required to restate contracts that begin and end within the same annual reporting period
  • An entity should be permitted to use hindsight in estimating variable consideration in the comparative reporting periods
  • An entity should be require to perform the onerous test only at the effective date unless an onerous contract liability was recognised previously in a comparative period
  • An entity should not be required to disclose the maturity analyses of remaining performance obligations for prior periods.


Under IFRS 1, the transitional provisions in other IFRSs do not apply to a first-time adopter transitioning to IFRS. As a result, the Board discussed whether any specific exemptions should be added to IFRS 1 with respect to the revenue standard.

The staff recommended not providing any relief to first time adopters of IFRS as they believed the reliefs provided for retrospective application would not significantly help first-time adopters in accounting for all transactions in accordance with IFRSs from the transition date. However, several of the IASB members expressed sympathy and preferred granting the relief on an optional basis. One of the Board members mentioned that some jurisdictions transitioning to IFRS currently have revenue recognition guidance similar to existing IFRS and therefore may not result in the duplicative exercise the staff was concerned about. Ultimately the Board tentatively decided [in a 6-4 vote] to provide the same relief to first-time adopters as provided to other preparers on an optional basis.

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