What’s the best option for your business on transition to IFRS 15?
While the effective date of IFRS 15 may seem a long way off, one key decision needs to be made soon – how to transition to the new standard.
It is important to make your decision early in order to develop an efficient implementation plan, but making that decision may not be straightforward.
Our publication Transition to the new revenue standard helps you understand the best option for your business.
At one end of the spectrum, a company can choose to apply the new standard to its historical transactions – and retrospectively adjust each comparative period presented in its first IFRS 15 financial statements.
At the other end of the spectrum, a company can recognise the cumulative effect of applying the new standard at the date of initial application – and make no adjustments to its comparative information. A series of optional practical expedients create additional alternatives and may ease transition.
While the chosen transition option can have a significant effect on revenue trends in the financial statements, it can also affect cost trends, because the standard includes specific guidance on costs related to acquiring and fulfilling a contract.
Furthermore, a change in the timing of revenue recognition may require a corresponding change in the timing of recognition of related costs. However, to identify the optimal approach it will be necessary to consider a broad range of other business issues – from IT implementation plans to communications with stakeholders.
There is no 'one size fits all' approach to this complex decision. However, we have identified a set of core issues that will be relevant to many businesses – and some simple steps you can take now to inform your decision.
We hope this publication will help you choose the best transition option for your business.
For KPMG’s most recent publications on the new standard, visit our IFRS – Revenue hot topics page.
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