Revenue recognition (IASB only)

Date recorded:

The Technical Manager introduced the session and noted that the objective of the session was to address the due process considerations and the comment letter period associated with the Exposure Draft Clarifications to IFRS 15 Revenue from Contracts with Customers (Clarifications to IFRS 15) (“ED”), and noted that the staff would also ask the IASB members for their views on the proposed transition requirements and proposed effective date.  She highlighted the fact that there was no requirement to propose an effective date in the ED, but noted that given the particular circumstances the staff thought it would be useful to provide some indication around the effective date – noting that the staff recommended an effective date of 1 January 2018, which would be consistent with the proposed deferred effective date of IFRS 15.  She noted that the staff recommended that early adoption would be permitted, but that this would be a separate decision from electing to adopt IFRS 15 early, so an entity adopting IFRS 15 early could choose to adopt the clarifications at the same time or at a later date.  She further noted that the staff had not proposed any specific transition requirements, and this would mean that entities would implement the clarifications retrospectively – so entities would go back and restate their financial statements as if the clarifications had always been included in IFRS 15.  She added that the expectation was that most entities would adopt the clarifications at the same time as initial adoption of IFRS 15.  She asked the IASB members whether they had any comments on the proposals.

With respect to the proposed transition requirements, several IASB member agreed with what the staff were proposing, but expressed concerns that, as currently written (in paragraph 19 of the agenda paper), users might not apply the requirements as the IASB intended, and asked the staff to add more wording to state how it would be expected to work.

Another IASB member noted that he disagreed that entities applying the clarifications at a later date than initial application of IFRS 15 should be required to restate the cumulative effect adjustment recognised upon initial application of IFRS 15 for the effects, if any, of applying the clarifications.  He favoured allowing prospective application of the clarifications in such circumstances – noting that asking companies to restate twice in a short period of time was unacceptable.  He noted that the IASB needed to be mindful of the fact that they had allowed earlier adoption and that they were dealing with a number of jurisdictions at different stages of adoption of IFRS, noting that for example, India was mandating the use of an IFRS 15 equivalent from 2016 and companies would have already invested in systems changes.  He noted that the proposed approach was almost penalising those who had believed IFRS 15 was final and had prepared earlier.

In response to the comments of the previous IASB member, the Technical Director noted that he understood the concern, but noted that the amendments were only clarifications and very limited in scope, adding that it was unlikely that the clarifications would affect all entities in any significant way.  He noted that if, for example, on licences, the clarifications were going to affect an entity in a significant way, then retrospective application would be appropriate to avoid a lack of comparability running on for extensive periods of time.  Another IASB member also noted that the invitation to comment would give the IASB a chance to ask specifically if they had given proper consideration of the issues that may arise, and provide the IASB with a sense of the scale of entities that may be adopting early and do not want to have to revisit some of the decisions they have made in their systems changes to get to that early implementation.  She noted that depending on the feedback, her preference would be for the IASB to propose a bigger window between restatements, rather than exempting entities from restatement, but noted that discussion should focus on these being clarifications without big impacts.

Another IASB member noted that he believed the transition to IFRS 15 was already complex enough with the different transition approaches in the Standard, and noted his preference to keep things as simple as possible, and to have an effective date for the clarifications the same as IFRS 15 and if an entity chose to early adopt they would have to early adopt the clarifications also.  He noted that the last thing he wanted to see was two different versions of IFRS 15 running at the same time with entities choosing only part of IFRS 15 and deferring the rest.  He noted that the IASB needed to ensure comparability as much as possible and suggested a “package approach” - either early adopt the Standard and the clarifications or wait until 2018.  Some others highlighted the difficulties of this approach for those entities that were planning to early adopt and had already done all the work based on the old words.


Thirteen of the fourteen IASB members agreed that no specific transition requirements should be included regarding the proposed amendments; but that the wording needed to be more specific about the methodology.

All fourteen IASB members agreed with a comment period of 90 days for the ED.

All fourteen IASB members confirmed that they were satisfied that all due process steps required to date had been complied with; and agreed with the proposed timeline and gave the staff permission to start the balloting process.

One IASB member indicated that he may dissent from the proposed clarifications.

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