Telecom and real estate are some of the industries, which are significantly affected due to IFRS 15. Under IFRS 15, entities will have to allocate the transaction price to each performance obligation that is distinct based on the relative standalone selling price.
As 2018 was the first year application for IFRS 9 and we are now approaching the end of the 2018 financial year, we would like to know what were the challenges being faced by business sectors across Kuwait ie banking, oil, and gas, telecom sector, corporates in relation to IFRS 9?
The challenges being faced by business sectors across Kuwait in relation to IFRS 9 are as follows:
IFRS 15 brings significant accounting policy changes in the recognition of revenue. Based on your experience, which is the major affected industries and how are they tackling the hurdles relating to the implementation of the new standard and the extent of the volatility of revenue that the new standard brings?
Telecom and real estate are some of the industries, which are significantly affected due to IFRS 15. Under IFRS 15, entities will have to allocate the transaction price to each performance obligation that is distinct based on the relative standalone selling price. This poses challenges in determining the standalone selling price, making the existing systems capable of dealing with voluminous transactions and IFRS 15 computations for financial reporting etc. Companies have been working to determine gaps between IAS 18 and IFRS 15.
Based on criticality and number of gaps, most companies are engaging consultants to carry out system changes to make the existing system capable to handle IFRS 15 computations and reporting.
How prepared are businesses in Kuwait with the new IFRS 9 and 15 disclosure requirements for the year end?
As many businesses have mandatory interim reporting based on regulatory requirements, they have already prepared the interim disclosure requirements; thus, have a clear understanding as to what are the disclosure requirements for the year-end.
However, many other companies will be preparing their IFRS 9 and IFRS 15 compliant financial statements for the year ended 31 December 2018 for the first time in this year. There are many changes in the disclosure requirements and therefore they may face significant challenges for first-time preparation of their financial statements.
With IFRS 16 implementation on the horizon, based on initial impact assessment, how prepared are businesses across Kuwait for the new standard?
A: Most companies are in the initial phase of implementing IFRS 16. Large companies have already started their IFRS 16 transition journey. There are several challenges, which companies may face in the implementation of IFRS 16; such as, determination of lease term when contracts are open ended, collation of historical lease data, computations as per IFRS 16 for all lease populations through a system, etc.
In regards to the IFRS update event being held on 21 November, what can the attendees look forward to and how can attending this event help their businesses?
The IFRS event being held on 21 November, is a great opportunity for businesses to stay up to date with changes that have been bought about during the current year. During the course of the event, we will be touching upon the practical challenges that have been faced by businesses upon implementation of IFRS 9 and 15. Another highlight of the event is IFRS 16 – Leases, since we are now approaching the application date. The event will provide a forum for businesses across Kuwait to gain a better understanding of the standard and the requirements for the new accounting treatment of leases.
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