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Power & utilities – Implementing IFRS 15

Power & utilities – Implementing IFRS 15

We look at possible impacts of IFRS 15, actions that may be needed, and how KPMG can help.


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IFRS 15 for power and utilities flyer image: power station

The new revenue standard will result in significant impacts across the sector.

Now that the IASB and FASB have published a new joint standard on revenue recognition, the real work for power and utilities companies is just beginning.

We look at how IFRS 15 Revenue from Contracts with Customers will affect companies in the power and utilities sector, and how KPMG can help.

How you might be affected

The new standard will result in significant impacts across the power and utilities sector. In particular, some revenue may be recognised earlier than it is today, whilst some costs may be deferred. And the new disclosure requirements are extensive. 

However, the impacts will be felt far beyond accounting change. A number of sector-specific arrangements will be affected, including: 

  • transfers of assets from customers; and 
  • take or pay arrangements.

Transfers of assets from customers

The new standard supersedes current IFRS guidance on transfers of assets. 

Under the new standard, you will need to assess whether you’ve gained control of the assets received, and then apply the guidance on non-cash consideration – i.e. measure it at fair value, if that can be reasonably estimated.

You’ll then apply the general guidance in IFRS 15 to determine whether revenue should be recognised immediately or deferred.

You may need to review the contractual terms of such arrangements to assess whether the timing of revenue recognition will be affected under the new standard.

Take or pay arrangements

IFRS 15 introduces a new approach for breakage, which may affect take or pay arrangements. 

If you expect to be entitled to breakage, you will need to recognise the estimated breakage amount as revenue in proportion to the pattern of rights exercised by the customer.

Otherwise, you will only recognise breakage as revenue when the likelihood of your customer exercising its rights becomes remote. 

This may change the timing of breakage revenue recognised.

You may need to review the contractual terms and business practices for such arrangements to understand the implications of the new standard.

In addition, new accounting procedures may be needed to determine the treatment of breakage, and you may need to develop processes, systems and internal controls to identify and report take or pay arrangements.

How we can help

Read Accounting for revenue is changing: Impact on power and utilities companies (PDF 220 KB) to further understand how these and other power and utilities sector-specific arrangements are affected, and the actions you may need to take.

It gives examples of how our cross-functional team of experts has helped clients across various sectors – including energy and natural resources – with the accounting and operational challenges of the new revenue standard.

These include:

  • performing an overall impact assessment to identify the key revenue streams that may be impacted by IFRS 15;
  • performing a detailed accounting diagnostic to identify and prioritise the impacts on accounting policies and disclosures, including information gaps; and
  • reviewing key accounting policies and accounting manuals.

Please speak to your usual KPMG contact if you would like to find out more about how KPMG can help your business.

For KPMG’s most recent publications on the new standard, visit our IFRS – Revenue hot topics page.

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