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AASB 15: New revenue disclosures for half year accounts

AASB 15: New revenue disclosures for half year accounts

AASB 15 Revenue from Contracts with Customers is here for 31 December 2018 year-ends onward. Have you fully considered all the implementation issues? As part of your implementation project consideration should be given to a range of different issues around revenue recognition and measurement, capitalisation of costs, disclosures, transition and flow on impacts to other standards. This article provides observations on transition approaches and disclosure requirements of the new standard.

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Kim Heng

Partner, Audit, Assurance & Risk Consulting

KPMG Australia

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New revenue standard – Transition

You may have worked hard to ensure revenue transactions are appropriately accounted under the new standard, but have you considered the transition approach and related disclosures, including for your 31 December 2018 half-year accounts? We are finding that these are often an ‘after thought’ but they shouldn’t be. Transition approaches will have impacts beyond your first year and high quality disclosures can help explain your transition story.

Transition approaches

There are three approaches to moving to the new standard:

  • Full retrospective – restate comparatives as if the new standard had always applied.
  • Modified retrospective – as with the full retrospective but using practical expedients.
  • Cumulative – do not restate comparatives.

Most organisations are using the cumulative approach to avoid going back to re-asses impacts on previous financial periods. But what’s the catch? Well, there’s additional disclosure required with this approach. You have to disclose in the current year what the accounting would have been under the old revenue standard – yes that’s right, maintain records under the old standard for another year!

Half-year reporting requirements

AASB 134 Interim Financial Reporting, rather than the specific transitional disclosures in the new revenue standard apply in half year accounts and you need to disclose:

  • explanation of the significant events that change financial position and performance of the entity
  • description of new accounting policies
  • disaggregation of revenue (this is not only a year end disclosure).

Regulators and users expect the full revenue story and providing the full transition disclosures in the half year accounts will likely satisfy this. But if you don’t plan to provide all the transitional disclosures, then what should you include in your half-year accounts? We think the following areas should be discussed at the very minimum:

Transition impact

Transition approach selected, practical expedients used and dollar impact begins to tell the transition story to users. Explaining changes in revenue numbers is a given, but don’t forget the balance sheet.

What if the impact of the new standard isn’t material? Judgments were made to get to this outcome so consider discussing them: from determination of the number of performance obligations to whether variable consideration is constrained.

New accounting policies

Depending on the transition approach you may have one or two sets of accounting policies to discuss – you need to ensure these are clear and specific to your organisation.

Disaggregation of revenue

Meaningful disaggregation of revenue is required this half year. We are seeing most entities use two types of disaggregation to explain the nature and timing of revenue, usually by product/services lines and geography. But these categories may not be the most meaningful for your organisation. Would customer type be more meaningful (e.g. government vs non-government) or contracting type (e.g. fixed fee vs time and materials). These are important considerations which should also involve your investor relations team.

Where to next?

As you draft your accounts our example financial statements are available to guide you on how to provide the transition story. ASIC will be monitoring these disclosures, so get started!

If you would like to discuss the implementations of the new standard on your organisation contact your usual KPMG contact or the contacts on this page.

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