EFRAG issues draft endorsement advice and effects study report on IFRS 15

  • EFRAG (European Financial Reporting Advisory Group) (dk green) Image

16 Oct, 2014

The European Financial Reporting Advisory Group (EFRAG) has issued for comment its draft endorsement advice for the use of IFRS 15 'Revenue from Contracts with Customers' in the European Union (EU). EFRAG has also issued its Effects Study Report.

IFRS 15, issued by the International Accounting Standards Board (IASB) on 28 May 2014, supersedes IAS 18 'Revenue', IAS 11 'Construction Contracts' and a number of revenue-related interpretations. Application of the standard is mandatory for all IFRS reporters and it applies to nearly all contracts with customers: the main exceptions are leases, financial instruments and insurance contracts.

The new standard provides a single, principles based five-step model to be applied to the recognition of revenue from contracts within its scope. The five steps are:

  • Identify the contract with the customer,
  • Identify the performance obligations in the contract,
  • Determine the transaction price,
  • Allocate the transaction price to the performance obligations in the contracts,
  • Recognise revenue when (or as) the entity satisfies a performance obligation.

EFRAG supports the adoption of IFRS 15 and recommends its endorsement.  EFRAG’s initial assessment is that IFRS 15 meets the technical requirements of the Regulation (EC) No 1606/2002 of the European Parliament and of the Council on the application of international accounting standards.     

EFRAG’s conclusion is supported by an Effects Study Report which considers the costs and benefits of implementing IFRS 15. EFRAG’s assessment is that the benefits for preparers and users in implementing IFRS 15 outweigh the costs.

Comments are requested by 15 December 2014. 

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