ASBJ issues revenue recognition standard based on IFRS 15

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03 Apr 2018

The Accounting Standards Board of Japan (ASBJ) has issued a new revenue standard, which is largely based on IFRS 15 'Revenue from Contracts with Customers'.

The new Japanese GAAP Standard No. 29 Accounting Standard for Revenue Recognition builds on the core principle of IFRS 15 (an entity shall recognise revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services) and the main model to apply the principle (the five step model).

However, the new standard is not identical with IFRS 15 as the ASBJ followed two policies in developing it: (1) Basically, incorporate all IFRS 15 requirements, but (2) consider additional alternative treatments where they would make application easier (cost benefit considerations). The aim was to have a standard that can be more easily applied by companies reporting under Japanese GAAP but to end up with a standard that would not significantly impair international comparability.

Among others, there are departures in the following areas:

  • Contract cost accounting is not covered in new standard.
  • There are multiple alternative treatments that may be applied instead of requirements that would be applied under IFRS 15. Some are practical expedients for items that are typically expected to be immaterial (minor contract modifications, minor promises, shipping and handling, short-term contracts, maritime shipping, recognition timing for standard domestic sales, etc.), others are exemptions for specific types of transactions (onerous construction/software development contracts, sale and buyback of materials).
  • Most of the IFRS 15 disclosure provisions are currently not included. The ASBJ intends develop this section by the time of the effective date of the new standard (fiscal years ending 31 March 2021).

The ASBJ believes that these departures will not significantly hinder international comparability. However, until the standard has been applied by companies and the degree to which they will use the alternative treatsments is known, it is not quite clear what the departures will sum up to in the end.

The new standard and the implementation guidance released with it are only available in the Japanese language. Please click to access them on the ASBJ website.

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