The new IFRSs on revenue and financial instruments are effective from January 2018. Are you ready for them?
The new IFRSs on revenue and financial instruments are effective from January 2018.
One of the most challenging new standards, especially for corporate companies, is IFRS 15 Revenue from Contracts with Customers, which has been set to replace IAS 18 Revenue and IAS 11 Construction Contracts. Most corporate companies are highly affected by it, with the industries of telecom, engineering, construction, and software perhaps facing the biggest change. The implementation of this standard not only has a significant impact on finance departments, but also on many other departments: it required redesigning of processes in accounting systems, amendment of sales-related processes and systems, expansion of the contract management, adjustments of remuneration models and planning and budgeting processes, and consideration of capital market communication.
IFRS 9 Financial Instruments brought fundamental changes to financial instrument accounting and replaced IAS 39 Financial Instruments: Recognition and Measurement. The standard introduced new criteria on how to classify a financial asset, and launched a new impairment model based on forward-looking information and on expected credit losses. It also introduced a new hedge accounting model aligned with risk management.
IFRS 16 Leases, which has been effective for annual periods beginning on or after 1 January 2019 (early adoption permitted), requires recognition of most leases on the balance sheet. It changes the accounting treatment of leases by lessees substantially.