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Revenue from contracts with customers

Date recorded:

Recap

The Board decided in December 2015to finalise the proposed amendments. The objective of this session was to discuss the comment letters received on transition requirements, and the effective date and finally to confirm whether the due process requirements were met.

Staff analysis and recommendation

The staff recommended maintaining the proposals in the ED that the amendments should be applied retrospectively and did not provide specific transition requirements for first-time adopters because the amendments were intended to clarify the Board’s intentions rather than change the Standard. The staff also recommended that there was no need for re-exposure because the changes were not fundamental. In relation to the effective date, the staff indicated that there was general agreement from the comment letters received with aligning the effective date of the amendments with the IFRS 15 effective date. The staff recommended maintaining the proposal because the amendments would be published in March 2016 which would give entities sufficient time to consider these amendments.

Discussion

The Board approved the staff recommendations.

One Board member indicated that he would dissent because the amendments would not provide transition relief for completed contracts (the ED required full retrospective application) whereas IFRS 15 provided transition relief for completed contracts, providing a modified retrospective approach. The Board member indicated that the transition provisions proposed in ED conflicted with the principle in the Standard.

There was substantive debate about this concern in which the staff and other Board members indicated that (i) the amendments were clarifications only and accordingly, no significant impact was expected.; (ii) in situations in which the amendments have a significant impact it would be more appropriate to have full prospective application to allow users to understand the impact of the amendments; (iii) the general principle should be to require full retrospective application and there should be high hurdle to move from this principle; and (iv) no comments were raised from the feedback obtained in the ED regarding concerns about the transition requirements.

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