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FRC comments on the IASBs clarifications to IFRS 15

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13 Oct 2015

The Financial Reporting Council (FRC) has commented on the IASB exposure draft ED/2015/6 'Clarifications to IFRS 15'.

The FRC supports the proposed clarifications to IFRS 15 and agrees with the International Accounting Standards Board (IASB) that any clarifications should only be made where “this is necessary to ensure that the requirements of the Standard are interpreted consistently”. 

Whilst supporting the IASB’s efforts to achieve convergence between IFRS 15 and the Financial Accounting Standards Board (FASB) equivalent revenue Standard (Topic 606) and reducing divergence between the two Standards, the FRC highlights that the development of a high quality Standard that meets the needs of its stakeholders should be prioritised over convergence “when agreement with the FASB on appropriate and consistent interpretation of the Standards cannot be reached”.  In this light, it agrees with the IASB’s decision “not to clarify or amend in IFRS 15 certain matters that the FASB has decided to clarify or amend in Topic 606”.

The FRC believes “it is imperative” that the Basis for Conclusions states the reasons for differences in wording between each area of IFRS 15 and Topic 606 and this should include “whether the difference is simply semantic and is not expected to result in divergent practice, or that it could result in divergent practice and explain the circumstances in which this may occur”.  The FRC also recommends that the Basis for Conclusions “specifically states that IFRS reporters should not apply the requirements of Topic 606 in areas where FASB amendments result in more extensive or restrictive requirements”.

Finally the FRC suggests that the IASB and FASB should continue regular dialogue on implementation issues to enable “agreement to be reached on appropriate and consistent interpretation of the revenue Standards wherever possible”.

The full comment letter is available on the FRC website.

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